a third option are mission items, but these are easy to spot as they have a little "mission" next to them. they won´t change their status even when the mission is gone.
the last time i tried upgrades it seemed i could not mix legal and illegal items.
so lets say i need 5 energy regulators, i´d need either 5 legal or 5 illegal ones.
but that might have changed, or might change in the future.
not sure about the mission items, but i think you can only sell them - they will clutter your inventory BADLY if you don´t get rid of them, as they don´t stack:
issue tracker is here:
issues.frontierstore.net
item overview is here(sort for "used"):
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inara.cz
no idea abut the atmo question, i didn´t notice it - but that doesn´t mean it´s not there