Hmm, this is sort of inconsistent with what others are saying, as well as the stated terms involving rewards nights counting if there's a paid night. My understanding is that a reservation with:
(a) one reward or paid night would earn one elite night
(b) two reward nights would earn two elite nights
(c) two paid nights would earn four elite nights
(d) one paid plus one reward night would earn four nights (or maybe three nights?)

If (d) only earns three nights, there really isn't any additional incentive to use points unless you need the free night to make your one paid night reservation a two night mixed one in order to get the first night to count twice. I have a reservation in which I used points on the third night so I could check out at 7PM and get the double elite nights for that. It's probably not worth it if the free night counts as one.