Was the $65 "upgrade" to main cabin the fare difference or was it a cheap MCM (Main Cabin Monetization) offer? Did your receipt (after calling within 24 hours, etc.) reflect a true X fare without designators?

If DL is adamant about no upgrades in such situations, they need to train redcoats and GAs to always look at the underlying fares before making any VDB offers that could possibly contradict the policy. OTOH, the person handling the VDBs probably saw the OP's C+ boarding pass and elite status, so that they would have assumed that it was an ordinary coach (main cabin) fare with a C+ "upgrade."

After all of this drama, what hotel did DL pay for at ATL? Were the hotel and meal vouchers part of the VDB deal? It sounds like the OP begged for these later at some DL counter.

I'd be extremely annoyed about the time this whole hassle consumed.

To me, it's also a mystery that revenue management even saw the OP's rebooking. In fact, this would have been Friday evening (or maybe late afternoon yesterday during the holiday season), so I'm surprised that they were even working at that time. I wouldn't have guessed that DL would have some IT capacity to flag VDB rebookings to target those involving negotiated upgrades as part of the deal.

Is there any chance that another GA working the flight unilaterally decided that the OP's D1 deal was too generous and did something to "fix" it? Or could the redcoat and/or station manager have had some second thoughts and decided to renege?