I think this would be the best way to do it:
1) Create two member levels: free and paid (you probably already did)
2) Assign all your members to first free level, set status = Active
Now they will be able to login and upgrade to paid.
(You can export the whole list, change level and status as needed and import back)
Let us know if this helps.
Dmitry Buterin, Chief Apricot