You can upgrade but just not via the mail in kit-- has to be in-store. (Pain, I know.) We'll have to wait and see if they do something different this year to accommodate T-Mobile customers or if it just turns out iUP was a terrible idea for anyone on T-Mobile that's not near an apple store. (I'm actually not sure these are unlocked if they're on a payment plan.)
Unless you pay for the Verizon phone up front (not on an installment plan like iUP), you have to have a Verizon account to activate the phone on. I know because I tried to pull this stunt last year

They had to follow up with iUP customers directly to find and allocate stock for them to get phones, and I told them I wanted a Verizon device (because it had more bands / was more universal than the GSM model... I don't understand why Apple does this, they ought to have one model if it can accommodate all the carriers like the Verizon one did).
In any case, yeah-- I had to activate it on a line there in the store, that was the only way I was walking out of there with a Verizon phone without paying full price for it up front. Someone else can speak to this, but if ordering online through iUP, I believe it will still require verifying your Verizon acct information as part of that order process.