I had once the same situation. The Starwood agent put me on hold to check with the hotel (for about 30 seconds) to confirm that the hotel would take the reservation for two rooms for the same night.

This was at the Westin Diplomat in Florida (April 2004).

It left me with the impression that it could be done... if the specific property was willing to accept whatever Starwood pays them for the free nights (i.e. had no better alternative).

In any case, the hotel must have said yes. On top of that, as a Platinum, I received a wonderful suite and an adjacent room, plus access to the lounge for my whole family. Very nice!

Things like this and I continue trying to requalify as a Platinum very year.