On Lufthansa flights originating in Germany at least, an upgrade is generally not possible on standby non-rev if your ticket is not issued for that class. If there is only free seats in business or first and you have an ticket in coach/economy they will generally accept you but they will upgrade a full fare coach passenger into business and give you his seat in coach. While it is unfortunate for the non-rev you can understand the logic - the full fare pax pays more than we do. You can always smile and ask though! Best of luck, enjoy your flights.