probably just a lazy agent, cause if your upgrade clears then your reservation in Y in gone, and to get that seat back the flight needs to have availability in the fare class you purchased. So if that availability is no longer available, the agent would have had to do a lot of work to put you back in Y.

This happened to me once, i miss timed my 500 deposit. I was initially told that if i didn't buy the 500s i would be forfiting the flight entirely and had to be rebooked on another day, but the 1k desk was able to put me in full fare Y, where i got a free Y-up at the gate, so maybe that's why the agent didn't bother with the whole process.

This is just my experience, dose anyone have any details on the exact rule.