I have no clue if an Item is technically an upgrade because there appears to be key stats missing from all Drops and Vendor Items, specifically the Attack and Defense values. With no way to gauge how much of a benefit the bonuses on the drops are versus the loss in "Attack" or "Defense" I'm pretty much sticking to the Base Items and only replacing the weapons for different load outs and abilities.
I know you guys know how to do this, Deathtrap had an item system that should be similar in nature to this. (Which BTW is a fantastic Game, and one of the reasons I have high Hopes for this one.)
Yes, purging the enemies of the Emperor is nice, but Progression and Loot is a key part to the ARPG. The crafting thing can come later (Obviously, It's on the Roadmap much Later). Get something together for Drops and Vendor to at least be stable and progressive.