I think it's perfectly logical. Once you are upgraded they are free to sell your original fare/seat. So your original fare is no longer available so they'd have to put you down to whatever it's selling at now. It would have happened if you had paper certs as well and you were going back to your Y seat.

Why should you use the SE 7 day window and then not even spend the SE credits. Doesn't seem fair. You were upgraded at 7 days and that piece of mind has cost you the SE credits. You should have risked it and used the 4 day window if you really wanted to spend the E credits. Although it sucks that you had to find out about it this way.