I made my last booking of this kind about 2 months ago without any push back. However, the issue I ran into twice with that same booking was that the points got pulled twice (and had to be redeposited) because I had enough points in my account but they were pegged for another stay that was supposed to happen later that month. Both times the points were pulled overnight (not immediately) and most likely were due to an audit process that is run daily. Finally, a note was placed to explain the situation and there were no subsequent issues.

I am guessing that the policy is a bit tighter now but the 1k negative balance limit sounds extremely restrictive. After all, that is equivalent to one diamond amenity at the FS hotel. I used (and never abused, meaning I always had enough points ahead of the stay) this (unwritten) benefit many a time and would be very, very disappointed if it were to go away.