Hi tony,
May I ask why you would remove the users from the Registered user-group when they upgrade ?
Joomla allows users to have multiple groups, and removing a user form the Registered user group may prevent many basic user rights (e.g. being able to login). The only reason that I could see is to prevent upgraded users from doing some actions or views that non-registered users are allowed to.
So I would first of all question the reason to want to remove the users from the Registered group, and instead maybe create another group e.g. FreeUsers group for what you want to do by removing rights to free users. And in that case, it works as intended, which is following, and that I just re-tested with both global settings "Create Subscriptions also for free lifetime plans" set to Yes and to No :
CBSubs itself doesn't have the funcitonality to remove a user from a user-group on subscription, but on unsubscription or upgrade, it does it if the usergroup is set there (except for the "Registered" group to protect admins from incorrect configurations). So if your plan is exclusive and you have an exclusive plan for free members that upgrades with another group than Registered, them to Registered, it removes the user-group on upgrade.