Travel Manual...
4.4 Passengers holding ALT who are offloaded/denied boarding are to be treated in a similar way to commercial passengers for hotel accommodation / refreshments / re-ticketing / re-booking.
I don't know about priority but yes, you can be offloaded...
Flight Ops Weekly Update July 2012:
Staff Travel [Fleet Management]
Staff travel is a privilege which we all enjoy and which we need to both respect and protect. Both we, and our dependants travelling on our concessions, need to understand the rules that apply.
Most of it is common sense. The most basic rule is that, whatever category or class our ticket, fare paying passengers take priority. We are required to give up our seats for commercial passengers and this can happen at any stage from check-in onwards. Once on board, if we are requested to give up our allocated seats for commercial passengers then this is what is expected, even if it results in being downgraded to a lower cabin. ALT and some other tickets are treated as commercial passengers but if a flight is overbooked, to avoid offloading paying customers, staff may be asked to volunteer to be offloaded or consider an alternative route.
Those staff who have access to First or Business class travel are reminded that class of travel is related to the specific conditions of their own employment and an allocated seat in First or Business class is not transferable to another employee or relative whose entitlement differs from their own. In addition, transit between cabins is not allowed and to avoid disruption to commercial passengers, you may not invite anyone to visit you if they are not eligible and ticketed in that class or higher.
Please review the Staff Travel Manual: