Ran into a similar situation recently flying SFO-YYZ. Checked-in at T-24 on a Standard fare (though no connection in my case) as a 25K and the site wanted to charge me for the preferred seat. I did not pay but it held the seat for me without issuing the boarding pass. Upon arrival at the airport, check-in staff were claiming that the benefit does not work when checking in online, but only works when checking-in at the airport. I don't think this is the case, as they seemed to be trying to find any explanation that fit for why the site was charging me.

That being said, they were able to waive the fee by moving me back to a standard seat and then moving me back up to the preferred seat. No fee charged and I got my preferred seat at the end of the day, so despite some arguing for it I was pleased with the outcome.