If I book a stay at a park hotel (my 2nd choice) and later my first choice becomes available, can I change to my first choice hotel. This would be booking direct on WDW website.
Yes. I've done it several times, but you will lose any discount if the hotel you are changing to doesn't have the same discount available and/or if the discount is not available at all anymore. Your deposit will transfer over to the new reservation.
If you are going to lose your discount, I sure hope you are switching to a resort that you can afford to lose the savings. Otherwise, I would recommend staying at the 1st choice resort the next time you visit WDW