There's this mod that does something similar:
www.vbulletin.org/forum/showthread.php?t=242068 It looks like what it does is changes the usergroupid in the user table directly.
Do you have code somewhere that sets the User Title to 'Deactivated' or are you doing that manually? I'm asking because if it's begin done in code, what you might be able to do is change the usergroupid field in the useractivation table, in any row where the userid matches.
To answer your question about checking the user title in a plugin, I think at register_activate_process you'd check $user['usertitle'].