I agree.

I'm still unclear as to what the problem is. Is it a) that United oversells the premium cabins at all? Or b) who was chosen to be downgraded? Or c) should there have been additional compensation?

I don't think (a) is likely to ever change. Even if UA were never to oversell a cabin, there would still be the problem of accomodating passengers who have misconnected, or like you mention, mechanicals or other irregular operations. As far as (b), I'd be stunned if UA didn't have an ordered list of who to downgrade, and only slightly less stunned if revenue were not the dominant piece of that. As far as (c), I think that UA should provide a little extra something beyond the return of the upgrade instrument.