G-CIVC

I have a single PNR reservation of 4 people (incl myself and a Ruby, other two no status) on 2 legs, 1 under 500 miles and one over. I was told by an AAgent that no 500-mile upgrades can be requested/used in this situation whatsoever unless I split the reservation right now. Is that true? I thought I would be able to effectively 'specify' who I would like to upgrade and our party would be split if upgrades were processed (for myself and who I specified) prior to airport control. Furthermore, isn't my sub-500-mi segment upgrade supposed to be requested even if I took no action? This is baffling and I wonder if any seasoned FTer can give me some advice. Thanks in adv