You may upgrade an item several times, with the number increasing with a higher quality. However, it is possible to reach the upgrade limit on a single item if you have filled all of the upgrade slots. When this happens, the item will no longer appear on the list to be upgraded.
If you no longer have use for a particular item, you may use it in Forging a new item. The better quality items you use in the Forging process, the higher the chance of the new item being one of a high quality will be. Be warned however, that items used in the Forging process will be lost to create the new item.