Why is it used this way instead of は for example? 


The まで means "even".

According to 明鏡国語辞典:

まで ㊁〘副助詞〙
❶ 極端なものを例示して、他はましてと暗示する。「君まで僕を疑うのか」「親にまで見限られるとは」

It is used to show an extreme example, implying that some other thing(s) is/are much more so.

"Even I am happy (as well as someone. / and others are much more so)."
(It's closer to 私嬉しい "I'm happy, too" than 私嬉しい "I'm happy.")

An example from Shogakukan's Progressive Japanese-English Dictionary:

老人まで踊っている。 Even old people are dancing.


私まで嬉しい is translated as “I am happy”, what function of まで is this?

This まで is used in the same sense as 雨が降りだして風まで出てきた, or 私までしかられるなんて.

The speaker is saying "I am happy though I have not much to do with it". There are other people directly involved with the incident they are talking about.

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