If the upgrade is requested during pre-registration, is the existing third or fourth level Domain Name automatically lost?
Not necessarily. You can request the upgrade to the 2nd level domain (xyz.ca) and abandon the 3rd or 4th level domain (xyz.on.ca or xyz.Ottawa.on.ca) when you pre-register your Domain Name with a CIRA-certified Registrar. The second level domain would be operational at the changeover date on or about November 1st and your 3rd or 4th level domain would cease to be active. Or, you can request the upgrade to the 2nd level domain and indicate that you wish to maintain the 3rd or 4th level domain (essentially two registrations, with two fees) Both names would be operational at the changeover date on or about November 1st.