You will not lower your elite status but staying for a night with accumulated points will not add to your total yearly nights needed for elite status. You are "credited" for a night when you actually pay for that stay. Using points merely reduces your total accumulated points.
I had this discussion with other frequent travelers in my office and your status is according to your stays you have earned. You have to maintain a certain level to stay Silver, Gold or Platinum but if you use points for a stay - it does not lower your level of membership. Someone correct me if I did not get this right. Cheers, kw