What am I doing wrong here? (i.e. inserting incremental letter)

If %1 represents the whole filename, then

will always be 0 as an "A" is no number and therefore the numeric value = 0.
see also your post from a couple of days ago:

To get an incremented letter at the end of the filename of the selected files, do not use Convert>Filename-Filename but Convert>Tag-Filename
Format string: %_filename% - $char($add(64,%_counter%))