As others have said, I have no idea how you have a dilemma about upgrading yourself or your wife! It's a waste to let them expire and I don't think your wife would appreciate you sitting up front while she's back in Y. I think you should upgrade her, while you stay in Y.
About your other question, no blues cannot upgrade onboard or at check in or in the lounge. It must be done before the flight (not sure exactly how long before).
I'm not sure about EK loaning you the miles as I've never heard of that happening but it's worth a shot to ask if they've done it for you before.

-ek202