Well, the outcome wasn't very positive. GP did not waive the fee, I didn't stay at the hotel and they claim that they have the right to charge more for the second person and that the T&C might not be that clear about that. I don't want to paste the reply I received from Karen but she might want to do that herself here anyway. I'll leave this up to her.

She wanted to contact the corporate office and ask that the term "minimum prevailing rack rate" be explained in more detail. However, I still think that the rate of the UPGRADED room should have nothing to do with that at all. I would still insist that I had booked a room for 2 people at the prevailing rack rate and wanted to upgrade that room using points. Their argument has always been that the upgraded room will be more expensive (of course it is because it is an upagrade!) and that the rate would change given that there is more than 1 person in the room.

Can anyone explain this any better to them than I can because I don't think they get the point about the way upgrades are supposed to work. They compare the rate of the upgraded room with the rate you have booked and then decide whether there will be a surcharge for a second person I don't think that's reasonable.