Az upgrades
 

Can anyone tell me if AZ upgrades platinum and silver elites
from economy to business on intra-european flights--
e.g. like FCO-FRA or FCO-CDG?

No, unless the flight is oversold.

Or if you buy a full fare economy ticket (Y class) and use your DL points to upgrade - http://www.skyteam.com/news/headlines/20081101.html

And actually, even then, I have the impression that skyteam status is very low down the line of upgrade predictors! :(

Unless I am missing a serious trick, AZ doesn't even HAVE "platinum and silver members", so I guess it would be pretty hard to upgrade them!

Az has
- club ulisse = silver
- freccia alata = gold
- freccia alata plus = platinum

But afaik no upgrades are granted.

As in all the other Skyteam airlines, ST status is trumped by the specific airline status.

This is quite shameful, but still, it is the way it is. No sense to blame it on AZ.

As stated on the website, Alitalia is not participating. I always wondered what does it mean: that AZ customers cannot upgrade on other Skyteam airlines, or that no-one can upgrade on AZ flights with miles from other ST partners, or both?

For a detailed answer, the OP lacks context, but it is probably worth noting here that the US concept of automatic upgrades for FFP elite members is virtually non-existant in Europe. (Apart from some untypical exceptions.)

The reason is that the European Business Class concept works differently form the US one in general, and that European FFPs have a stronger emphasis on lounge membership.