Ugh, wish I had seen this thread earlier. My wife (diamond) booked an award stay for two nights for my brother, knowing that he was going to use one of the two nights, but not knowing which. He called today to cancel the extra night and they canceled one night, no problem.
My wife checked her account and saw that the points hadn't been credited back. She called and they told her what everyone noted above, that they would have to cancel the old reservation and make a new one. Oops, hotel is sold out. No one, of course, could tell us why the person earlier today had told my brother that it was taken care of.
She finally got someone to do it for her, but it was not a pleasant experience. Bottom line: next time we do this, we'll book two separate reservations.
Mike