But I don't think that this is a KLM specific problem as it is handled that way in all programs.

You can always only upgrade on a handful closely related airlines (like KLM and NWA). For example, you can't use LH miles to upgrade SQ flights or BA miles to upgrade CX flights either.

As to why this is done that way, is I persume because the financial transaction is way more complicated across the different airlines / programs involved as you might buy a ticket of airline X and get the upgrade using airline Y's miles. Now, how much is the upgrade worth financially considering different fare bases for the original ticket? Where as if you get a business reward seat, airline Y just pays a fixed sum to airline X for a seat regardless of any special circumstances.

BTW - You can get upgrades using MH's Enrich program; however their earning / redeeming ratio is just awfull IMO...