yes, I think every upgrade should be an upgrade, even if the player makes ineffective choices. Some upgrades can be rather ineffective, and that's okay. For instance, hull damage on a laser is pretty weak for an upgrade. That's fine, lasers aren't for hull damage.
The expenditure of points, and the increased cost of later upgrades, is punishment enough for choosing upgrades unwisely. You don't have to ruin the weapon to boot. At least is someone upgrades unwisely, they can keep their weapon on until they can afford to build and upgrade another weapon to exceed it.
This will also help feed the loot frenzy, as I won't want to throw away 70-90 percent of the weapons I find, because their upgrades are a reduction in effectiveness from what I can build myself. I can't tell you how much I hate finding awesome celestial weapons with crap upgrades.
