The error message is a little unhelpful, it can also mean that you do not have enough NUAs to cover the full reservation. You've said that your NUAs expire at the end of this year: does your reservation include any nights in January? For example, if your stay is December 23rd to January 2nd, your 2025 NUAs are not applicable to the night of January 1st, which would cause the (unhelpful) error message (unless you also had 2026 NUAs available).

Although hotels can in theory block dates, it's not that common because there is little incentive: upgrades are granted in the days before arrival, based on the availability of rooms. During periods of high occupancy, there isn't going to be availability, and thus, no upgrade will be granted. That said, the description you've given of the hotel certainly sounds like it could be one of the small number of hotels that do block NUAs, so you may just be unlucky.