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Cycle 1... Apply, admitted, and defer xyz law school
Cycle 2... Attend grad school and change mind about attending xyz law school
Cycle 3... Withdraw deferral
Cycle 4, 5, or 6... Reapply to various law schools

Is the above scenario acceptable?

In other words, when you defer you agree to not hold deferred status or apply to other law schools. But can you withdraw that deferral during the cycle right before you matriculate and then reapply sometime in the following years? Or will this be seriously frowned upon or violate the contract in any way?

I dont really understand the purpose of going through all that. Are you saying that you want to reapply to get into a better school a few years after your original cycle? Is there anything that you've done that would substantially boost your application (LSAT jump, you cured cancer, etc)

whether you can do what you want to do, it would depend on the language of the deferment agreement.

Your deferral agreement will say you can't apply to other law schools, but once you withdraw from the school you deferred admission at, they don't control what you do in subsequent cycles. So technically that would be fine. You would lose your (usually double) deposit though. And adcomms might be reluctant to admit you again.

I don't know why you would want to go through all that. Just apply when you're ready to go to law school.