First, I'll tackle the upgrade issue.

If you're in the same PNR, you can both be upgraded. However, you will both be put on the list with the lowest priority, in this case the companion's priority. Also, as companions are only cleared about 12hrs. before departure usually and are below silver medallions on the upgrade list, the odds of you making first class are probably nil.
On the other hand, if you separate your PNR's you, the platinum medallion, will have a better chance of getting upgraded because you'll be up on the upgrade list at your normal priority level. Of course, your companion is still low man on the totem pole.

As far as bags, if you're in the same PNR, your companion will definitely get 2 free checked bags up to 70lbs. Also, as a side note, if you got upgraded to first class, you'd get three checked bags for free and thus you wouldn't have any problems.

If you're in different PNR's, your companion is still SUPPOSED to get free checked bags. However, automation is not in place to waive the bag fees. Thus, you'd actually have to check in with a person as opposed to a kiosk or online.

How this helps.