I've actually thought about this quite a bit and put some thought into it.
1) at a 10:1 upgrade ratio, it would take 1 GL >10epic >100 rare >1000UNC >10,000C (thats 1,000 and 10,000 of the 'junk'!) to make a GLike! Thats a TON!--This is a GOOD thing! It means that there WOULD still be UC/C on the AH because people would realize it would take FOREVER to get that many fragments! I've probably only had 400 common frags of a type my entire career! (thats a generous estimate) People would have to balance short-term gain of having ANY item with the EVENTUAL use for higher items!
2)Have it take the forge slots! That's right, you beat scrap metal/items into something useful! Now, I'm not sure if I'd say use the 'craft' section, or the 'repair' section to do the upgrade... probably the craft section. Again, this would make players stop and think 'upgrade for better frags, or actually make an item for now?". This upgrade should be lengthy.... 2 or 4 hours?
3)REQUIRE RESEARCH TO UNLOCK!!! (this was mentioned before by another)
Great idea! This would 'cap out' lower fame people with the quality of item they can forge up themselves, keeping an economy for the lower fragments for people that would actually use them! The research should be akin to the difficulty of unit upgrades, but in the COMMERCE tree! (forcing players to actually pay attention to that section of research) I'm not sure if it should be around the archer(UC)/Heavy(R)/Cav(EPIC)/Art(GL) points... if it should be staggered even more so it would be balanced with the 'special unit' unlocks.... probably the special units. This also would keep random alts from abusing the system, they wouldn't have the research to make the conversion!
4)THERE WOULD BE A MARKET FOR LOW-END FRAGMENTS! Right now, people just throw up C/UC frags for... whatever, and hope that they'll sell! Allowing upgrades would make even higher fame players pay attention to the C/UC market... Lets face it, after a certain point you wish you can filter the market so you don't even SEE the C/UC items/frags. They just spam out the good stuff
anyway!
5) Too expensive anyway! Don't worry about EVERYONE running around with NOTHING but GL items! Your repair cost fees would see to that. Players would have Gls, but be faced with the daunting cost of keeping them maintained! Actually I see more people using largely rare equips, with the few GLs interspersed throughout.