They drop the lowest priced night. Probably one of the already booked 4 nights is the one that is being dropped, not the one you adding to your reservation.

For example:
First night - 30,000
Second night - 40,000
Third night - 40,000
Fourth night - 44,000

Toral of 154,000

You are adding a fifth night for 45,000 points, the "5 night" free would actually be the first night (the lowest price) which would get to a total of 199,000 points minus the 30,000 points to 169,000.

You can see in your reservation which night is actually dropped.