Good point you're making in your second question, Flying Dutchman. I would also like the option of spending more miles for an upgraded room on a free stay, depending on the city and property.
As for your first question, are elite levels worth anything? Yes, I think so. In my limited experience, once you've joined a frequent stayer program you're more likely to be treated like an elite every now and again, if not comped to first- or mid-level status. It's an all around winning situation whether your hotel stays are planned or unexpected (misconnects, 11th-hour mileage runs, cancelled flights, etc.)
By way of example, I'm was comped to Silver about a year ago after only two stays at Hiltons. I spent just 16 nights in hotels last year, mostly for leisure travel, but by virture of simply belonging to HHonors with measley Silver status, I ended up in upgraded rooms without even asking. Now I ask, and I often get.
I also signed up for Starwood last May and after two Sheraton stays was just recently comped to Gold without even asking for it. I will certainly take it for a few test spins this year.
Definitely check out the hotel forums here on FT. They're chock full o' good info.
[This message has been edited by essxjay (edited 03-25-2000).]