Very excited for all of this when it hits public! That being said, I do have to say. 'Item Soul' doesn't sound very fitting. I'm not sure if there is an image for them. Let alone if they are meant to look like souls. So, i'm making these suggestions under the assumption that it isn't the case.
1. Scraps. (In the sense that the armor that should have been dropped by the enemy. Was too beat up or generally damaged and so, all you got was the scraps of what it once was.)
2. Materia. (Just straight up ripping off the name from FF7. But it does have a nice ring to it.)
3. Schematic Data and (as a change to the name 'sparks') Meta-Data. (This would obviously have better theming. If the idea was instead crafting your own armor rather than recycling 'useless junk'. I can admit though, that's a lot of pointless work. Just to make names more fitting.)