Simply put, the negative effects of a given grade stay the same every time you re-engineer it, while the positive effects get marginally better until you max the grade.
More useful on internal modules where jumping to the next grade causes negative effects to amplify by quite a bit, such as going from 40% mass increase at g3 to 60% at g4. Maxing out g3 can sometimes be more benificial than going up a grade.
For the most part weapons benefit more from going straight to g5 but there are some exceptions.