This is precisely what I have encountered. Flying ex-Europe, I figured with the 50% voucher an upgrade to C class wouldn't even be too terribly expensive. Turns out that while that may be true in terms of miles, it certainly isn't in terms of the ticket price. Just like OP mentioned, even M class tickets were marked as non-upgradeable on the OZ booking engine, and I would have to invest another 700 USD or so in order to use an upgrade.

My current plan for using my miles is to save up until I can book an award ticket for a companion and upgrade my own ticket. Seems that way you get to travel in C for the price of two ca. H fare tickets between the expensive B fare ticket and the surcharge for the "free" bonus mile ticket.

That plan costs a lot of miles, but I knew that going into the program and it seems that unless you book a multistop itinerary, you need to figure out a way to use that 50% voucher to spend your miles wisely.