I agree that Southwest should always rebook passengers on the next flight with any available seat and not just the next seat with availability in the same care category. For many routers, it is rare to find a WGA fair without at least seven days of advanced purchase, so acting the way that the airline tried to in the passenger's case could leave passengers in a bad situation.
The only thing that I can think of is that in some instances, Southwest over sells flights. So perhaps the seat wasn't really available, but they were willing to resell it at the Business Select fare and risk having to bump someone. I am curious whether the new flight was completely full.