AFAIK 500-milers can only be used to upgrade yourself and one traveling companion. You need to use Confirmed North American upgrades to upgrade the whole family.
Recently, I took an SFO-JFK-SFO trip with a couple of my relatives. One of them had somewhere around 36 500-milers but she couldn't upgrade all four of us because of this rule. She didn't have any Confirmed North American Upgrades at the time either so we had to fly coach

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