I do not like the idea of making weapons that aren't <insert U/U weapon here> look like said weapon. If you want that weapon, get that weapon. Crafted weapons and dropped weapons are and should remain different.

An upgrade tree, on the other hand, isn't as bad of an idea. However, it works better when upgrading items is the only form of progression (e.g. in monster hunter where you don't have levels and all of your stats come from equipment)