The above assumes all are traveling on a non Y/B ticket.

Someone of any status, or no status at all, can bypass all of them if they are on a Y/B ticket AND there is availability in the P bucket.

Translation:
FC seats come in 3 varieties 1) paid, 2) upgrade from full fare (tickets whose fare class start with Y or B) and 3) upgrades from discounted coach tickets.

In order to upgrade there must be inventory in the category you are allowed to go into. If there is no inventory you go on the waiting list - after you ask to be put on it.

Therefore, someone who bought a discounted ticket may be put on the waiting list while another person who bought a non discounted ticket gets the upgrade.

Once on the waiting list, it is exactly how Jcooke explained. Doesn't matter if it is full fare or not.