If an RPM is dragged from gmc into gnorpm, the Upgrade button doesn't do anything. The Install button works as expected (it brings up a list of conflicts that would arise from the attempted install.)
Is this with the errata gnorpm?
$ rpm -q gnorpm gnorpm-0.95.1-5 $
It seems that the Upgrade button does work properly if RPMs are dragged into an already-opened Install window. By habit, I drag them into the main window, which creates a new Install window with a broken Upgrade button.
In order to get the developers and maintainers of GnoRPM to look at this bug I have moved it to the GnoRPM category in the Gnome bug tracker. It can be found at http://bugzilla.gnome.org/show_bug.cgi?id=58451, where you can add yourself to the cc-field if you want to recieve information about changes to the bug tatus.