If your original booking is an Avios booking then you can't 'upgrade with Avios' online so you'd have to call to amend the booking. I don't know whether the phone fee would be waived, as this isn't something that can be done online at all.

If your original booking is a cash booking then as per the post above it can only be upgraded with Avios if it's in an eligible class.

Did the email you received relate to a promotional cash upgrade (i.e. a POUG)? If so, those should work on both cash and Avios bookings, but sometimes no upgrade appears when you click through. Or did it relate to upgrading with Avios - in which case see above for why it might not have worked.