That may be how it's supposed to work, but no one has yet reported on this yet.
When we won our bid, we were assigned the new suite even before payment was made; in fact, the upgrade fee shows up as a balance due and the due date was the original final payment date (i.e., a date in the past).
I believe you have 48 hours to pay, and if you don't pay, the upgrade is revoked and you are "supposed" to get back your original cabin. But if someone else is upgraded to your now vacated original cabin in the meantime and paid the upgrade charge, then what happens? Maybe they have a system in place to prevent that, but I would not trust Princess IT.