Yes you can upgrade the tickets that you get as part of your
free dining deal. You bring your tickets over to Guest Relations at any park (or City Hall at MK) and tell them that you want to upgrade. They'll calculate the price, you'll pay, they'll hand you your new APs. Your tickets will no longer be connected to your KTTW cards at this point.
Note that if another package deal with ticket requirements comes out, you will have to purchase the minimum tickets in order to get the deal. We upgraded our tickets that we bought with our free dining PIN trip in June to APs. We're having to buy 2 day base tickets with our August trip in order to get free dining (even with buying them, it's cheaper than a room only deal for my family; it's important to always do the math to figure out your best deal). We will have these tickets for future use (we're planning a trip where we pay for some extended family so we'll use these tickets for them) but we do have to buy them in order to get the package deal.