no, you are not offered an upgrade even if the upgrade is available, you would have to call ms and cancel the studio and use more points for a 1 bedroom, except if you cancel on the day of arrival you would lose the first night of points. the only time that someone would have gotten an upgrade would have been because the studio was unsafe, need repairs, etc.
one time i had booked the yacht club for 5 people and at check in the room was unavailable due to water damage and was offered a two bedroom at the bcv.