Construct Engineering bench and go to crafting and than go to upgrade tab, and if you have all parts for some item you can upgrade it. You also need fuel for this.
Quests are currently disabled because they are broken. But don't worry, they are working hard to fix them and you can still play the game right now. Quests achieved will be rewarded after they are enabled again! =)
As much as I don't want to play another MMO this game is actually pretty good and the quests are reasonable, treat it like a normal flash game and you'll be done in no time . Thanks for the update, hope they are up soon!