Rashi says that Rebbi Eliezer holds that Kedusha Rishona Kidsha Le’asid. Tosafos explains that otherwise it wouldn’t help to bring it to Yerushalayim. Why go back to Kedusha Rishona? Doesn’t everyone agree that Kedusha Shniya is Le’asid?
I do recall vaguely that there is a difference between the Kedusha of Eretz Yisroel and the Kedusha of Yerushalayim in this topic.
You are absolutely right on the last line. That’s the simple answer (though Tosfos in Arachin, I think, holds that Kedushas Yerushalayim was never Batel even if you hold Lo Kidsha).
Scratch the second half of that (which I already did). This is what happens when I try to answer questions without actually learning Daf Yomi. I was thinking Maaser Sheni, not Kerem Revai. Kerem Revai does apply nowadays. My bad.