Could it be that tickets booked via Expedia are not eligible for an upgrade? I know that if I were to book a Delta ticket on Expedia it says its for Basic Economy. If I go to the Delta website for $10-$15 more I can book a regular discounted economy ticket and reserve a seat at the time of booking.

I think the OP is running into an issue like if I purchased my Air France Economy Class ticket with Air France under the Delta Codeshare I need to contact Air France or do the upgrade via the Air France website. For instance I cannot use Delta miles to upgrade the Air France flight.

Perhaps Virgin is encouraging customers to book directly with Virgin as its done in an upgradeable booking code. Not all tickets are created the same and I do my best to book directly with the airline and ask the agent if I can upgrade my ticket using miles or for cash. Even if it means paying the agent fee to be certain that I am getting an upgradeable ticket. Also if you book online read the fare rules and it will say what ticket can and can't be upgraded.

I think what Expedia is telling the OP is to contact the airline who is operating the flight. If lets say the OP's ticket was booked on Delta ticket stock under Delta 3322 operated by Virgin Atlantic 33 SFO-LHR using their aircraft checkin is with Virgin as they manage the inventory. Delta has their own Business Class inventory that they manage for direct bookings but the upgrade inventory in the OP's situation lies with Virgin Atlantic. Expedia can't upgrade the ticket without paying the change fee and fare difference as it would be a new ticket.

Perhaps at checkin the OP will be offered the opportunity to upgrade to Premium Economy at a discounted rate or at the airport. Please keep us posted OP and perhaps other FTers will be able to "chime in".

If it were me I would just hold out to see if there are any upgrade offers at checkin and ask again when you checkin and at the gate. It would save the oP the Expedia change fee and fare difference. I once upgraded to Premium Economy for $350 from SFO-CDG and it was less than paying Expedia's $250 change fee+$1200 to upgrade.

Another time I upgraded on Lufthansa to Business Class from FRA-SFO for $600 less than the cost of changing the ticket. The agent was able to get it down to $500 so it was worth it.

The OP just has to be fine with flying Economy unless the OP really wants Premium Economy and then you need to do it through paying the change fee and fare difference. In the future its best just to book the class of service you would like to fly in to be guaranteed of flying in that class.

If I want to fly in First Class I will pay that up front.

Hope this helps.