I think that you either misunderstood the agent or the agent gave you the wrong info (certainly wouldn't be the first time!). Prior to day of departure, there are two waitlists for upgrades, the "PA" and "PB" waitlists. Although it is controversial here who gets on which, consensus is that if upgrading using SWU's you are placed on PA, on miles PB. The order of clearing is all on PA clear before it goes to PB and within each WL, it is cleared by order you were put on the waitlist, without regard to status or fare class.

Day of departure this all changes to Departure Management priority, which is organized by status first, then fare class, then other tie-breakers. In any case, nobody gets a free operational upgrade until all people willing to "pay" for their upgrade are cleared and then only if they have to take people out of coach because it is oversold. There are many, many threads on this topic in FT if you want to do a search.