Hey chrispyfrey
Thanks for the post and sorry about the confusion surrounding this process. To answer your original question, prior to JUMP the process was like it was explained to you. You would need to clear the original Installment plan to be able to begin a new one. This would be how it is now if you were not active on the JUMP feature.
You are able to take advantage of the trade in program but as you said the trade in value is less than the amount owed so you would end up paying more. You are able to make the amount owed on the phone due on your next bill and sell your device through other means and use that to pay the pending charge. This would also free up the installments to be used for the Nexus 5.
When you do get the new phone you will be eligible for JUMP, which has a 6 month enrollment period before the first JUMP upgrade can be completed. You would continue to be covered by the insurance portion of the feature the whole duration. I hope that begins to clear it up and please let us know if you have any other questions.