It's not as simple as "number 3" gets the upgrade. UA will resolve the oversold situation before they process upgrades. If PE is oversold then they will OpUp people to J to get all of them seated in their purchased or better-than-purchased cabin. In your case the no status PE pax (number 4) may wind up in J by virtue of an OpUp, not by mileage upgrade. Only after everybody has a seat who should have a seat on the plane and the oversold situation is resolved will they process the upgrade list. Assuming there are still J seats left then they will start popping off the list, whoever is left on it. It's entirely possible number 4 gets a J seat without their mileage upgrade ever processing.

Now, having said that...UA has methods to fix this situation in a myriad of ways. They may decide to manually check the upgrade list along with the oversold situation and see who they can process. But if there is no PN or PZ or RN to process into then it will become an OpUp via seat assignment only while booked class remains what it was.

-RM