Upgrading heroes to 5*

I vote Alfonse. Occasional arena bonus unit and we can pretty much guarantee that he'll EVENTUALLY get a weapon refinery upgrade. Plus we always get those occasional quests requiring someone of the Askr Trio to KO some certain unit.

My next vote would be Raven because I think he's an underrated green unit.

If any of them are for arena use, prioritize them. Even if the fodder/merge is going to your arena core, prioritize them. Merges in general are the next I would care about, then general fodder, then catalog.

It really depends on what you want.
For sheer combat usefulness:
Zephiel is amazing if you don't have the BK or Zelgius
Raven is a real powerhouse with that IV, though I'd go with Fury+LnD combo (otherwise he'll be 1 shot too easily)
Of course merging Valter or Xander might be fine too if you're not in a hurry to expand your roster.

Gotta say though that throwing limited units away feels wierd to me, but that's your choice.

I upgrade my 4*'s to 5*'s when I pull a 5* version of the same character. Then I merge to create a 5*+1. Feathers are scarce. I'm also more likely to upgrade 4*'s to make 5*+2, etc.

I don't go by Tier Lists. I go by luck of the draw. Unfortunately, I drew a 5* Peri.