Will I delevel and lose my gear if I "upgrade" my toon

You dont lose your old gear. You get a container of new gear and when you open it it all goes in your bags. Then you switch it out with your old gear as you choose.

Although this can be done to be extra safe, it's not necessary. Upgrading to a heroic character does not automatically put anything in your inventory, worn or bags. The items are retrieved through the quest reward window, so they will go to go to empty inventory spots. I guess that means you'll want to make sure you have enough open inventory slots when you select the rewards, though. Then you have to manually equip all of the gear.

My inventory slots are always full of some gear, pack, etc. So thats why I empty them.

So this is what happened. Same level, got some bags and some gear (worse then I had) and ZERO AAs

If I had deleted my toon (which I have put alot of hours into) and just created a new char I would have gotten *shrug* 4k AAs?

Can someone please explain to me why Daybreak think this is fair?

So you had already auto-granted then. They cant give you aa's that you already had. Iirc, I heroiced a 100 level enchanter a long time ago and it gave me all my rank 2 spells up to 100. Not sure if it still works like that.

woop woop relogged the toon and now have 4k AAs and the hotbuttons working. Happy cleric!