I just asked this question of MS and they said if you have enough points in your use year they will fill the waitlist, despite the fact that the condition of canceling a reservation that you've already canceled, can't be fulfilled.
If it can only be filled now by borrowing, then you definitely have to call or chat with MS to update your waitlist to reflect that.
Although MS is generally painless to involve, I really wish they enabled us to amend our waitlists ourselves.