I thought it would have been worth it paying $1700 for the upgrade to J. Although if that was mere fare difference, then maybe not.
One thing is that you can't very well trust agents for an airline in remote ports to do their jobs well; interlining is a sticky one and if they do it badly I wouldn't be surprised. I don't know who does ground services for VA in LAX (is it Virgin themselves?)....
Most of the time, if the agents at the check-in port can't do the job, then they'll pass the problem downline - natural reaction. Since VA don't operate their own lounge in LAX, definitely they will hand this further down the line (to next port of call). QF are pretty much the same (for example, I couldn't get a better seat for my domestic leg check-in at JNB, even though the agent there could give me a SYD-BNE boarding pass. I had to wait until I got to SYD, but by that time the plane was utterly full with more than 30 people on the waitlist for my flight :shocked:. The main reason the agent at JNB couldn't do it is because it was > 24 h for my domestic flight. I hope at least the agents at LAX gave your wife the reason why she couldn't get PE for her domestic whilst at LAX).
As for moving of seat - not good, unless they had a very good reason. Hopefully, unlike last time, it was an equal or better seat than she selected.