In case anyone still cares, I've investigated this at length. First of all, Dan's advice above is for Kotor 1 items. Remember how in K1, weapons and armors only had 1 possible upgrade per slot, and what that upgrade did exactly depended on the weapon or armor itself? Yeah. That's what those "Upgrade required to activate" properties were for.
In Kotor 2, upgradeability is governed by the UpgradeLevel field. Here's a list of UpgradeLevel values, taken from
http://z6.invisionfree.com/Mandalorian16965/ar/t51.htm
So, in order to change upgradeability, you have to open the relevant .uti file and change the UpgradeLevel value.
The tricky thing is that Kotor Tool's display of .uti files is buggy, and it won't show you the UpgradeLevel correctly, or allow you to change it. Use KGFF instead.
(BTW, when using KGFF, after changing a value in the edit boxes on the right side, be sure to then click on the left side of the window, so that you see the value listed there update. Took me forever to figure out why the hell my changes weren't being saved!).
For armors you can still use Kotor Tool, because it (faultily) displays UpgradeLevel in the Body Variation box, so if you change the Body Variation value, you're actually changing the upgrade level! For weapons, you have no choice but to use KGFF.