When I flew in uniform as a colonel, I was repeatedly offered upgrades to first c!ass. The guidance was clear: the optics were unacceptable and we were not too accept. I had to quietly counsel an AF LT flying in blues after a flight on which she bad accepted the upgrade. Apparently she was in the 10% who never gets the word...
Free Upgrades are up to airline. There’s no charge. I suppose if they ran out of burger and offered up filet mignon military personnel were supposed to turn that down too? Sometimes upgrades are offered to make room for cellos, or other seating arrangement (quadruplets) etc...
I took a red eye (shuttle) 777 back to Dulles once, and might have been the only passenger. It was configured for overseas (double crew). I was in uniform and was shown to the crew rest seating, curtains, fully reclinable seats and had a double (on the house) and nice long nap.