Gosh! I'm so sorry to hear of your troubles. We've upgraded several times but have found it is really pot luck getting a CM who knows what they're doing. We're inclined to go for the regular AP and then buy Water Park APs if we decide to visits TL or BB. We're not interested in Disney Quest. You are only able to upgrade to Regular APs if you haven't been to a Water Park with your 14/21 Day ticket before hand. We do know it's a slow process and set aside lots of time to do it. I generally work out how much my ticket is worth in $s so that I have a rough idea of how much I think I'll be charged and then argue with them if I think they've got it wrong. If they don't budge then I just go somewhere else and start again. HS is normally pretty good and I know that Wayneg has exchanged tickets there in the past too. Time was you could get better offers in different places however in recent years we've found that prices have been much more stable across Guest Relations counters.
Upgrading to an AP is a pain.
I went to guest services in all 4 parks and DTD. Given different prices and told I couldn't do it.
No problem upgrading to a regular AP, can't understand why they are telling you they can't do it So long as you don't use your Ultimate for entry to a WP or DQ then there should be no problem upgrading to a regular AP, although not something you wanted to do anyway.
As said HS was the best price, saved quite a bit compared to buying AP's outright but a pain sorting it out.