Just wanted to add my experience to the conversation. We arrived in the world on 10/11.
We purchased DVC APs back before the annual price increase. I had heard that getting them upgraded to PAPs was outside of policy, so I had low expectations going in.
But just for kicks, when we went to pick up our APs at MK guest relations, I asked if it was possible to upgrade them to the PAP discounted tickets. At first, the CM started to say, "Well, there are pretty strict rules regarding ticket upgrades, so I don't think we can." But before I could even respond, she turned to her manager and asked him. After a very brief conversation with her manager, she said she would be happy to do it for us.
All we had to do was fill out a small "refund voucher" for the difference in price--which I didn't even ask for, by the way; I was more than happy to eat the difference for the better passes--and give her a credit card to refund the $110. A couple minutes later, we had our PAPs!
It was a great way to start a great trip. Our kids had never been to a water park or Disney Quest, and they ended up loving BB and DQ. For our trip next June, we intend to hit both water parks and DQ again. The discount was great too, and saved us a considerable amount. We already got our money's worth out of the tickets, so our next trip is just gravy as far as we are concerned.
I realize you can't expect this, since it is against policy, but it certainly doesn't hurt to politely ask when you get there. The manager didn't hesitate at all in authorizing the upgrade, and clearly knew how to do it. Good luck to everyone!