Looks like this is now totally the case, upgrades using miles even with GuestSeat available on that flight will be processed as cash and miles where the miles part is a conversion from cash at a 0.0055$ per mile.

Just tried on AUH-MAN where the GuestSeat is available in business to be quoted 55,000 miles and 4,000 AED or 250,000 miles.

So only viable way to use miles is by booking the very limited GuestSeats directly, whereby you don't get any tier miles for those flights.