No, it means that United will not refund a discounted upgrade due to a voluntary change -- they just keep it.

It sounds like they might have calculated the price of the upgrade as part of the fare when determining your fare difference. IMO, that's the right thing to do, although their own rules give them the ability not to do so.

The only way really to be sure what happened is to calculate the number of PQP you earn, once the trip is complete, compared to the total price that you paid. Even that will be a bit tricky because you'll have to figure out the total taxes paid (they're excluded from PQP). If the PQP is approximately equal to the total after removing taxes, then the upgrade was counted as part of the fare; if the PQP is less than the total, by approximately the amount of your upgrade, then it was not.