I believe you can use it whenever, but you can't use it on an already existing reservation. I think you can only use it when you book a new reservation.
what is the reasoning that you can not use it on an existing reservation, your using points for an upgrade
That's what it says in the terms. I'm guessing because they want some money out of it. Meaning, they don't want to give you a suite upgrade if your there on a comp basic room. Their probably wanting you to pay $300 for a two night stay at basic rates and then give you the upgrade. I'm only guessing here...
It's in the terms of service. This is the worst reward possible. Basically, if you want to redeem the reward, you have to call the number to make the booking. However, you have book at the full price, which basically negates any point of the upgrade, since you can usually find the price of the upgraded room with a promo code cheaper than that of the standard room at regular price.