So why wouldn't he beat the online deal for you and include loyalty? It's outrageous that he should say the deal online is better but you'll lose your loyalty. He should beat it. (in either definition of the term).
I'm in the same boat - orange contract just finished. don't know what to do yet. I'll be interested to see how you get on in the shops. There are miles better deals around than the one he offered you.
You would have been better off just asking for your PAC before even mentioning upgrades. They would immediately be trying to stop you from leaving, and would put you through to the department that offers the best deals.
MY ADVICE is to search around for the best deal you can find anywhere - even those including cashback by dedemption - and armed with these deals, phone Orange and ask for your PAC. Don't talk about upgrade. Just ask for your PAC. They will say 'Oh, is there any reason why you're thinking of leaving Orange?' and you will say, 'Yeah, you are too expensive and I've seen a great deal elsewhere...' and they will put you through to 'disconnections' where you are ostensibly asking for your PAC (which takes 30 days, and you can always cancel and they tell you this) but they will start offering you deals "in the meantime" to see if you might not change your mind. And they will be much better than any official upgrade, because the first guy you talked to about uprades doesn't have the authority to offer better deals. Ask for your PAC!
I don't think the Orange loyalty benefits that have been accrued can be transferred though.