Preoccupy, v. t. [imp. & p. p. Preoccupied (-pid); p. pr. & vb. n. Preoccupying.] — Webster enters it under “preoccupy”
Etymology: [Cf. F. préoccuper. See Preoccupate, Occupy.]
1. To take possession of before another; as, to preoccupy a country not before held.
2. To prepossess; to engage, occupy, or engross the attention of, beforehand; hence, to prejudice. I Think it more respectful to the reader to leave something to reflections than to preoccupy his judgment. Arbuthnot.
Shades of meaning
Fernald has no entry of its own for preoccupied; he lists it under abstracted.
Where he writes about it:
As regards mental action, absorbed, abstracted, and preoccupied refer to the cause, absent or absent-minded to the effect. — from abstracted
A preoccupied person may seem listless and thoughtless, but the really listless and thoughtless have not mental energy to be preoccupied. — from abstracted
One who is preoccupied is intensely busy in thought; one may be absent-minded either through intense concentration or simply through inattention, with fitful and aimless wandering of thought. — from abstracted