The correct way to allocate upgrades is of course to work out which kind of customer, the $3000 Silver flier or the $2999 Platinum flier, will give more marginal revenue to Continental from receiving upgrades. Average fare paid is irrelevant - airlines are about trying to maximize profit, not 'fairness'.

My guess is that the Silver flier paying that much is presumably booking last minute and flying nonstops, and would probably keep doing that anyway when Continental is the most convenient option for them. So to a first approximation, the marginal benefit of giving them upgrades is zero. Whereas the Platinum paying $2999 is clearly maximizing their miles to earn upgrades, so if they had no chance at those upgrades because high fare low status fliers were ahead in the priority list, then they might well switch all their flying to another airline where flying lots of miles got them upgrades. So the marginal benefit to Continental of offering this Platinum flier upgrades is probably pretty close to $2999 (less what they would have sold any seats on full flights for, but since most flights are not 100% full, this isn't that much). So it makes a lot of sense to give the upgrades to the cheap fare Platinum.

Actually what this analysis suggests is that it would be best to reward those who fly a lot and pay very little, since they're probably the most fussy customers. That is, FTers should get upgraded ahead of all other fliers...

(All of this assumes that other airlines keep offering status according to BIS miles. It might well be that if airlines could (illegally) collude and all offer status based only on fares paid, then they would all be better off. The analysis above wouldn't apply because the $2999 Platinum who gets no upgrades wouldn't have anywhere to defect to. But that ain't how the world works yet, thankfully for FTers!)