Youve got it. It did take a few days for Amex to email me the details of the cancellation and the credit shell reference number. There was also a modest cancellation fee of $30 I think. After purchasing the flexi I am still acrrying a credit with Virgin for a few dollars.
Wanted to follow up on this - many thanks Shane2603 for helping me get past a mental blockage. I assumed the 'free' Amex flights would be immovable, unchangeable, blah blah, but no, in fact, they openly tell you that if you cancel the free flight then you will receive a credit shell.
For the sake of others interested in this, and as the process seems to be open and accepted at both Amex and VA - my experience relates to the Velocity Amex Plat and flight of interest was PER-SYD return:
1) Ring Amex, book against free flight included with Velocity Amex. This booked into X (outwards) and T (inwards) class and is a "saver" type fare. I obtained from the extremely helpful CSR both the Amex referrence number and the DJ PNR. Also ensured that my Velocity number was input which I think helped later on.
2) Within an hour or so I could see the discount economy ticket under my Velocity account
3) Probably could have rung Amex back right away, but busy day, so, next morning, rang Velocity to ensure that Flexi to Business buckets were available. Asked them about "Q" class and yes, was assured that Q was the upgrade class (bummer as you can't see Q class in Expert Flyer) and that fares were available.
4) Rang Amex, told them what I wanted to do. Cancel existing Saver fare, obtain credit shell and immediately use credit to book a Flexi fare on the same flight number. No problem at all. They rang DJ, got the current Flexi price, subtracted the credit and added the $87 (yes, $87!!) change fee. Total cost to me in dollars would be just over half the normal price of a Flexi return for this itinerary including the change fee (and, presumably, an embedded credit card fee). Asked if I'd like to proceed? I concur. Amex rings DJ back and makes the booking. The Amex PNR stayed the same, but I received a new DJ PNR
5) Ring Velocity with my DJ PNR, ask to upgrade the flexi ticket to business. No problem sir, and we've got a special on at the moment of half price upgrades (wheeee!). Moments later I get a confirmation email from the Velocity shop in relation to the upgrade and can already see the DJ PNR on the velocity site as upgraded to business.
H class availability on Expertflyer immediately dropped by 1 bucket. Still no direct demonstrable correlation between "Q" class and "H" class, but there is certainly some linkage.
Overall, took about and hour and a half on the phone. Given a fair bit of backwards and forwards as well as waiting time for back-end communications to happen. As I had not done this before I guess I was really crossing the t's and dotting the i's as well, so probably wasted some of the CSR's time in so doing.
Overall, great result. Amex and DJ both, at the booking end of their business, seem competent and efficient.