I have firsthand knowledge of this (well, actually secondhand (my boss)).

Last month, my boss was ticketed on a restricted ticket IAH-DEN-IAH for the first morning flight on IAH-DEN. The day before, he and I called the Elite Priority Line (he's a Platinum) to ask if he could standby for a later flight. We were told that as long as he checked in no more than 2 hours after his scheduled departure, he could standby for the next available flight.

He checked in at the President's Club 45 minutes after his ticketed departure (well within the 2 hours he had been told), to be verbally accosted by the agent "You really screwed up. Your whole itinerary has been cancelled." He was totally taken aback by her behavior, and in fact wrote a letter to Greg Brenneman about it (her behavior actually got worse as he continued to deal with her). He received a very nice personal reply from Brenneman's office and has not seen her again after quite a few visits to various PCs at IAH.

Anyway, the PC agent eventually gave him a boarding pass for the next flight, as there were plenty of seats available, but she wouldn't re-instate his return flight because she said it was sold out. She put him on an earlier flight on his return day. Well, I knew that return flight wasn't sold out cause I had been checking its availability for upgrades, so I called our TA who had issued the ticket. In reality, his fare class was sold out but there was plenty of availability on the flight. So the P.C. agent lied to him. The P.C. agent did not charge him $75 for all this rigamarole, but surely let him know she was doing him a favor.

This whole ordeal was totally uncalled for because he did exactly what the Elite Priority Line told him he could do, just as you have been told.

So anyway, that IS the rule, and in addition to some of the agents being ill-informed of the rules, the computers (at least in his case) were not programmed to allow for the 2 hour late checkin.