If you cancel you will have to pay cancellation fees. The only exception is due to bereavement of the account holder.
You can do that but you would still be liable for fees because you are going to a "lower" contract. Try calling the Options Team on 0800.800.030 to see what they can do if anything to help
I think your phone should still work to speak with bt. you would need to clear any outstanding balance before you get your services back on. I doubt a mod would be able to assist as you know what the problem is with your services.