The upgrade indicator does not take pet level into account when suggesting upgrades during a pet battle. I made some changes to my local copy of your addon that adds this functionality and have attached these changes to the ticket for your reference should you choose to implement this.
The changes only involved a few lines of between the following lines in these files:
Battle.lua (Lines 129-140)
Journal.lua (Lines 81-115)
I have been testing this out for a few weeks now without any issues. The changes even take into account that pets at higher levels lose a level or two when caught.