I am fine with reputation based perks such as getting the Imperial Clipper, or certain missions being available or not based on faction rep. I am however absolutely opposed to things like weapons upgrades, ship availability, damage perks, things like that based on your combat, trading, or exploring rank. That would essentially be unlocking rewards for levelling up.
Why not have them as side-grades? The super amazing long range gunt is basicaly like a rail gun, but with a little less fall-off, a little less damage close-range, etc
Mandatory Upgrades will be really, really bad, but side-grades that you buy for the look or some super specific feature that is to most people completely irrelevant.