Penalties are necessary for things like burst - even the minimum benefit from burst (+1) outright doubles the effectiveness of most weapons, without other penalties.
Generally, what I've seen done in game design, is for a developer to assign a point value corresponding to the 'benefit' of a point in every possible area. (Even in things that aren't directly a part of the numbers, like how anti-hull weapons have a smaller target than anti-shield weapons.) This is rarely a perfect representation of benefit-per-point, but it gives you a good starting point in determining how much damage one upgrade in damage should convey, vs one point in range. And in highly effective upgrades like burst, it gives you a starting point for how much to scale other factors back so that the weapon still gains a certain amount of benefit, despite the setbacks you put in place.
I don't think anybody will fully upgrade most weapons - the exponentially rising costs take care of that. You may be able to obtain the Best Projectile Cannon Ever - but you will have a much weaker fleet.
