spent a few hours leveling pets in valley of the four winds this weekend. along the way, i picked up three family-specific battle-stones - the kind that can only be used to upgrade pets of a particular family. (note that this contradicts the patch notes, which said family-specific ones only came from battling tamers.) since the valley is full of critters and aquatics, that's what i got. it's kind of unfortunate that the pets most needful of upgrading, because they are really rare and therefore hard to farm for a rare, are also the ones hardest to get a battle stone for. yes magic i'm looking at you - willy needs an upgrade! (apparently you can also get a general purpose battle-stone from battling wild pets, but the odds are super low.)
anywho, when you get one of these stones, the way you use it is as follows: (1) summon the pet you want to upgrade. (2) target the pet. (3) right click on the stone in your inventory. a little clunky, but at least it works. since rare critters and aquatics aren't too hard to find in the wild, i ended up using my stones on quest reward pets that have a distinctive, if not unique, look. so war pug the perky pug, commodore bob the fishy, and peanut all got the goods.
got some traffic from folks looking for the polished battle-stone vendor. you can buy them from commander lo ping in townlong steppes - he hangs out in the niuzao temple, out in the islands. i'm not feeling any need to buy these myself - as many rares as i have at this point, paying to make a pet uncommon is not appealing. but not everyone is me, so if it fits your plans, then rock on.