Yep, I was a victim of the "You Board You Lose" approach at AC last week. I was
#2 on the upgrade list. Capacity: 16, Booked: 15, Checked-in: 14. I boarded at the end of Group 2, asked the GA if there were any hope for an upgrade for me and she said there was no chance I'd get a J seat, so I boarded. The number of booked seats dropped to 14 as boarding progressed.
Sure enough, when boarding was complete, there were two free seats in J. The GA came on board, exhanged a few words with the SD while handing the manifest over. after which the SD came in the back to fetch two people and put them in the free J seats. One of them was an FA in uniform (deadheading?) and the other was a man in a suit. So at least one seat was given to a non-rev and I don't know about the other.
A bit frustrating to watch from my 12C seat but not a big deal considering this was a pretty short flight.