What happened to the OP is indeed unusual, atleast, comparing to my experience as well. The 500-milers are only pulled out only after my request clears, and I choose the upgrade instrument, and check-in officially.

Thus, even if I don't have enough 500-milers at the time I make the request, and the upgrade clears, there will be no problem, since upon check-in, that's when the 500-milers will be pulled therefore allowing me to purchase however 500-milers I need. On occassions I change my mind about upgrading, I simply tell the agent about the change, he/she checks me in my original seat selection, and my upgrade bank is not touched and remain intact.

(I also have an upgrade request that just cleared today and looking at my 500-milers, none had been deducted, as should be the case)