Sounds like it all happened at T-1 hour which means it was completely under the GA's control. No rules regarding U space, no upgrade processor, etc. The GA in theory can give any empty F seat to whomever they want, but I'm guessing the official policy is to follow the processor list.

While the upgrade processor would've skipped a PNR with 2 people (only 1 seats), it's very likely that a human GA will just go to the next person on the list. If they decline because they want to stay together, go to the next person on the list. Maybe some GA's follow the processor rules and skip PNRs with 2 people, which is why its always a good idea to check in with them before on upgrade status and clarify your intentions, and hope they remember

I've been that "next person" on the list and had the guy literally in front of me talking to the GA decline to split up, then they gave it to me