That is also the part I am not entirely clear about.

To me, a flight upgraded (be it with miles or with cash) entitles a passenger to fly in the particular travel class he/she has upgraded to and therefore fully entitles him/her to downgrade compensation if he/she is made to travel in a lower travel class (including the one originally booked).

That said, if the OP travelled one leg in Y and one in J I would find his situation much less shocking (downgrade entitlement notwithstanding) than if he was downgraded to Y on both flights.