MS will only book the FW using the full allotment of current year points (they never use banked or borrowed points) if your full allotment of current year points is available. If you've already booked something with those points, they won't make your FW reservation.
And yes, once they make your FW reservation, you can cancel it, but you can't do that by yourself. You have to call or chat with MS to cancel a FW reservation and they'll make sure you get your full contracts points back. Once that is done, they're just normal
DVC points you can use to make reservations with.
The odds may be low, but yes, it is possible to screw this up, even if you are booking right at 11 months and/or walking it at 11 months. There might be enough other people walking a reservation that you can never grab the first day. Also, even if you get the first day, it is possible that you walk into somebody else's FW reservation and you get blocked. If walking, always try to add the Sunday ASAP because FW reservations begin/end on Sundays.