All I know is that the idea that it doesnt work, ever, flies in the face of what i've personally experienced recently. I booked at Palm Aire with a 1BR and it upgraded me to a 2BR Deluxe instantly. I ended up cancelling that reservation a week later and booking at Sea Gardens when a 1BR Deluxe at Ocean Palms opened up, when I went to book that stay it wanted to upgrade me to a 2BR at one of the other buildings at Sea Gardens, and I declined. So my last 2 bookings I either received, or was offered an instant upgrade...
Also started a booking at Bonnet Creek and I could upgrade from a 1BR Deluxe to 2BR Deluxe, but I cancelled out of the reservation before finishing because of some last minute plan changes...
So it's working. It might not be working to some of your desires, but it's working. Like
@HitchHiker71 said, it's likely there are some restrictions behind the scenes that inventory may not be eligible for instant upgrades... or maybe you are reserving at a resort which VIP benefits don't apply