Yes, you are correct. I make a reservation for a redemption (in fact at the point I make the reservation it doesn't matter whether it's going to be an upgrade or a full redemption - same booking class). If it's a long way out then they might set the deadline by which you have to confirm and issue the ticket (and the underlying ticket if it's to be an upgrade) at 14 days before the flight, but for shorter notice stuff you can negotiate a much shorter deadline. For flights ex-HKG I've negotiated them down to 24 hours before as the deadline on occasion.
I almost always buy the underlying ticket from CX - through the website if available, and direct from telephone sales if I need to invoke the Diamond privilege because the flight is full in the class I need to book (obviously when booking an upgrade from economy you buy the cheapest available upgradeable fare). Note that you don't get exempted from the other conditions of the underlying fare (min/max stay, rebooking charges, valid flights, etc.). Since you can always get any YBHKMLV fare you want from CX up to 24 hours before the flight I've never really seen much benefit in booking through an agent. Sometimes though I'm trying to upgrade a segment on a round-the-world ticket that I have bought somewhere else, and which might be on the ticket stock of another OneWorld airline. In this case if it's an e-ticket they normally just need to know the ticket number, but if it's paper or they can't see the e-tkt image for some reason then you need to fax them a copy of the underlying ticket. This means that you need a few more days and can't leave it quite to the last minute.