I don't mind hotels that do this - it doesn't really make sense as its easy exploitable. One could simply book on multiple accounts, waiting for the best upgrade. One could also decide to cancel the room if no upgrade is given. If you're not in a rush (say you're staying close to where you live) you'd just keep rebooking and then stay on a day where the upgrade is good.
Morning where the reservation can not be cancelled and bookings have (mostly) been finalised makes most sense. If you want to book, then you should book and stay knowing that you might only get a basic or Exec room. However, at the same time, the hotel should also be honest and provide a decent amount of upgrades to elite or loyal members if they are available.