I vote yea on upgrades for IC items rather than enchantments... Currently in 1.43 the items that can be enchanted are treated as tools, including the nano saber. And upgrade system would be something alblaka could control rather than having Notch break it with every update, and would be beneficial for people who like using the basic tools and cannot construct a better tool (i.e. basic drill vs diamond drill), or for making top level tools and gear even better (50% mining speed bonus on a diamond drill in a miner, anyone?)
If an upgrade system is to be implemented, I also recommend making it a not-OP system by having drawbacks to the upgrades. Perhaps the drill can mine 50% faster now, or get specifically obsidian 80% faster, but now it takes 25% more power per whack. Or the ability for the drill to do better melee damage so you can leave the saw behind on some trips, but the drill mines 10% slower.
I think finding nether fortresses is the hardest thing you can do in MC, I am having 10x more trouble finding a single damn fortress than I did fighting the end boss (Gene just takes a lot of time to fight... it's not hard if you bother to do it right). As such, there should be an equally difficult way to craft buff items without the need for running around the nether dodging ghasts like an idiot.
Oh, and I'm throwing in a recommendation for a swimming speed buff right now. I think everyone would appreciate swimming faster than a geriatric.
Lastly, make it cost something other than just XP for the upgrades. Maybe exclusive crafting recipes that also cost XP? Maybe you can purchase different levels and types of "upgrade tokens" that impart different abilities into tools/armor.