The first hotel where I worked was corporate-owned and operated. In that situation, we'd move the room into the block but keep the lower rate. Both GMs I worked under there had the same philosophy: making a few extra dollars wasn't worth the potential for a complaint.

The second hotel I was at was independently-owned. We didn't participate in city-wide convention room blocks. If we did, I guarantee we would have changed the reservation to the higher convention rate. (The owners didn't want us to comp anything.)