This is typical of a story that has no basis in truth, there are many. A guarantee cannot be assigned to a lower category of stateroom than the Cat on the guarantee. Any inside cabin is a lower category than any balcony cabin. No cruiseline will ever issue a lower Cat on a guarantee and I've never heard of it ever happening with any line. If they ever actually overbooked a cruise and had to take such drastic action to assign a cabin, the most likely outcome would be a full fare refund and a future cruise credit issued. Holland had a rash of overbookings early last year because of a programming error. They caught the error before the ships had sailed and sent notifications to agents and clients with a generous offer for move over options, that means change ships/sailing dates and they would refund 1/2 the cruise fare, give a higher category of cabin and refund any air change expenses up to a given amount. It didn't take long for the number of people they needed to move took advantage of the offer and the problem was solved prior to anyone arriving at the pier to a surprise.
The cruiselines and other agents, being human, do make errors. Someone can be booked into a wrong category, a wrong ship and sailing date or anything else you can imagine. It happens but it happens rarely. When it does happen its tragic but its not by design or a policy on the part of a cruiseline. When it happens these stories come out and there is a conspiracy involved in the story tellers mind. Then others pick up on the story and it become the cruiselines doing horrible things to people. If the stories were true, the cruiseline wouldn't be in business long.