This is so confusing. Here is my take on it (which is probably wrong):
Lets say there are 8 Q400 vacancies as per the EOI, and 10 surplus 300 Captains. The top 8 will be awarded Q400 commands as per the vacancies, and then two of the most junior Q400 captains will be displaced as per 57.4.1 (c). Or possibly, the most two junior 300 captains will be demoted to FO's, which would actually be the more logical solution. However, if there are no FO positions available, then two junior FO's will either be displaced or terminated.
My brain hurts.