The thread running your high priority VI in which you wait for notifier (or occurrence) will be "blocked" until you send notification (or set occurrence). While the thread is blocked, other threads will run, including lower priority threads. One way to verify this is with the execution trace tool.
If you don't have the trace tool, there's another way to test this. In a normal priority VI, obtain a notifier and call a while loop*. In parallel, call a time-critical subVI that waits for notification (see attachment). After the loop finishes, send notification. This VI will finish, which means the time-critical subVI had to relinquish the CPU in order for the normal priority parent to send notification. Otherwise, we'd be waiting forever for a notifi
cation in the time-critical subVI.
*Put sleep in the while loop to ensure that LabVIEW reaches the time-critical subVI before the while loop runs to completion.