"Luffing rights" (a term I dislike) are controlled by rule 17. It says "If a boat clear astern becomes overlapped within two of her hull lengths to leeward of a boat on the same tack, she shall not sail above her proper course..."

Here is where the lee-bow part of the story becomes important. While the boats were beating to windward on opposite tacks, they were not overlapped (see the definition of overlap). When the port boat passed head-to-wind, she was either ahead of or overlapped with the starboard boat. The pivotal point is that boat I (inside) did not establish overlap with boat O (outside) from clear astern. Therefore, rule 17 does not apply and Boat I may sail abover her proper course.

In short, as long as she gives boat O room to keep clear (see rule 16.1), Boat I may luff up to head-to-wind at any time. She could have done so before or after reaching the zone. It's a legitimate tactic to persuade the windward boat to tack away.

I hoope that helps,
Eric