Without knowing the specific travel dates, it's hard to say exactly what the situation is on the train in question.
However, the likely answer in this case is the simplest answer of all: no rooms were made available for sale at the intermediate buckets. Just a quick search of Arrow for train 14 on October 13, for example, shows nobody booked in the sleepers (deluxe or roomettes). However, there is only one of each (bedroom and roomette) currently available at the D bucket rate (for the bedroom case, this would be an accommodation charge of $326). And yes, you can pick any bedroom (or roomette) and still get that D bucket rate.
Once that room sells, the next room available is at the full S rate ($738), skipping the C, B, and A buckets completely. On the roomette side, C and B are skipped, and the next roomette would be at the A rate (jumping from $151 to $285). On different dates, different levels of availability are set for the various buckets, and there are some A buckets available. It really depends on the specific train/date combination, and what revenue management has set up for that day.
Assuming nothing changes (and revenue management is constantly tweaking bucket availability, so the likelihood that "nothing" will change between now and October is very low), and two people book bedrooms (the first one at the D bucket rate, the second one at the S rate), and the first one (D) cancels, then, since the number of bedrooms remaining sold (i.e. 1) still equals or exceeds the threshold for the D bucket (also 1), the room goes back into inventory at the S bucket.
