As others have posted, DL Medallions can u/g from any fare class, based on their elite status and fare class paid. But it goes a bit further than that.

Upgrade requests are issued at 5/3/1 days prior to flt based on elite status (PM/GM/FO) and fare class against upgrade inventory. If there is no (or no more) u/g inventory available, then Medaillion upgrade requests go to the gate upgrade process (the "gate lottery") at 30 min prior to departure.

For the GA to be selling u/gs, any Medallions who requested upgrades should have already been upgraded.

There are exceptions to this process: HI (HNL, OGG), and international routes, for example. There, fare class paid and upgrade class availability are the deciding factors (i.e., gate upgrades to international BE are very rare - think OPUP only) and are limited/restricted to the upper fare classes (Y/B/M)

Reasons are many and varied, but I'd suspect that DL would like you to get status with them before they begin to treat you special. If they handed out or sold u/gs to non-elites (bypassing elites), there'd be no incentive to gain status with them. What's going to garner more revenue, the $100 gate upgrades, or the FF who puts in the BIS miles to make elite status?

That's the (over)simplified version.

Hope this helped a bit.