Hi, welcome to the Virgin board.
Yes, it is possible to book upgrades using miles. I know it doesn't help you for Christmas, but VS are currently doing a special offer. You will find full details at:
http://www.iflyvirginatlantic.com/main154.htm
This is only valid until April - but who knows what may happen after that?
It also give you an idea of what the upgrades may cost.
Nick