When presenting Isla with a 'Codpiece +1' she no longer recognizes it as a Codpiece. I am not sure if this applies to all upgradeable equipment, but I believe that there should be an option to present an upgraded item as a normal item, even if it may seem at the expense of the player. Perhaps a prompt could be used that asks "Do you wish to use [ITEM] +[LEVEL]?" if the concern is that players may lose their upgraded belongings.