I fly American exclusively and we've always been able to use miles to
upgrade - even on packages or any of their specials.
We flew American a couple of years ago on a weekend special just before
Christmas for $219 roundtrip and they were most happy to let us use miles
to upgrade to business class.
Also, with American now, you can upgrade just one segment of your flight
- say, if you just want to use the miles for the Europe to USA portion
of the flight, you can do that with fewer miles.