So upgrades can be additional uses or effects added to abilities and weapons. For weapons it's mostly just enchantments like adding a fire effect or just making it deal more damage. For abilities you can shorten the cooldown or add additional effects as well. As for the no free stuff, you did get free stuff, I calculated the average Joe player and instead of forcing everyone to have certain stats and what not, I'm letting you all have free range on what you want by letting you spend points instead.

I understand...I think. Side note: are guns still a no-go?

Yea, most ranged weapons are just a little too op to include. I will however allows muskets and bows with a limited amount of ammo.