I encountered this problem when moving Gilad Palleon to Nzoth to updgrade but there was no option for either the upgrade to the Reaper or the Megador. Teran Rogriss was also in the fleet and there was no option to upgrade him to the bellator.

So i then conquered Kuat and still none of the options came up. I then checked the normal conquest and i could upgrade heroes, just not in custom galactic conquest.

If any of the mod developers read this that would be great since this is a bug I would really like to see fixed!