Hello, all! I need some advice.

I am a gold member of Miles+More. I had a few upgrade coupons and wanted to use two of them to try and upgrade both myself and my companion on the way from Yerevan to Athens. At check in the ground staff told us that our tickets had been cancelled by the airline. I talked to the airline representative who advised that we had lost the seats as a result of a denied upgrade request. To make things even more interesting, the economy was full, which in fact meant that the flight was overbooked. After an hour of negotiations with four members of the ground staff, I got a seat in business and my companion got the last seat in economy. I was also made to pay for the two pieces of checked luggage that I had as technically I didn't have a ticket. What I think had happened was they cancelled our tickets and didn't issue new ones. The coupons are still intact, though.
I complained to the airline, and they are now telling me that my tickets were never cancelled, but they are generously offering to reimburse me for the checked baggage.

Am I right in thinking that I should be somehow compensated for this experience or am I being a Karen unreasonable?
A friend of mine got a free flight with Aegean because the curtain between the business and economy cabins was faulty. Somehow, my problem feels a bit worse.