The whole Star Alliance Award system has devalued a lot over the years IMHO. Almost all airlines in the Star Alliance group have limitations on Star Alliance awards compared to their own Frequent Flyer award programs. To me this is wrong, and not something you can really blame SK for.
10 years ago I could do upgrades on LH flights in the airport using my EB points. No need for an award voucher or similar. They were able to deduct the points from my EB account directly. This is not possible anymore. :-(

The reason SK can't do the upgrade manually is most likely down to no upgrades awards being available to Star Alliance members.