If you upgrade with Avios, there needs to be award space and the ticket needs to be highly flexible/expensive. As mentioned, you are much better off just buying all of the avios necessary for a full award. (although I suppose that triple Avios promos, status bonuses, etc. might make the maths a bit closer since you should still earn avios from the original Y ticket) Basically, upgrade only really works for people who work for cheapo companies that only pay for Y flights but are willing to pay for flexibility.

AFAIK, the bid for upgrade does not care about your booked fare code. Unlike Yllanes, I would gladly pay 500 euros for an upgrade, but never in a million years would I risk flying in IB long-haul Y by paying for an economy ticket. So I haven't tried bid for upgrade either...