I just cashed out about 3,500 points for one transaction to see what would happen. It appears they did not reverse any points awarded on the original purchase. They said there would be a statement credit within three days.
The Pay Yourself Back page lists the eligible transactions. You can check a box on each transaction, then click "continue", so it looks like you can do it all in one swoon.
According to a TPG write, they won't take back points.
http://disq.us/p/29jo3a2