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.
I was a JAG. I figured if I was going to be advising commanders on disciplinary actions for this, I had better comply with the directive myself.