I could be wrong but I read it slightly differently...
If a co.uk domain drops, then any rights goes with it. "There is no ‘second choice’ mechanism". The right does not ever get passed on to an org.uk.
The .org.uk only gets the rights if it was registered at the cut off and there was no co.uk registered at the cutoff.
If both org.uk and co.uk were registered at cutoff, the co.uk is the one with the right. If the co.uk is then dropped, then the rights drops with it. The right DOESN'T get passed on to the org.uk, even if the org.uk was registered before the cut-off.