I have a different yet similiar bug from other topic regarding quality selecting - I can upgrade from Normal to Uncommon just fine . When I try to upgrade to Rare, I can't do it - the recipe demands Normal quality of materials - all recipes from this mod in Factoriopedia defines normal quality items at any quality level.
When I choose Rare quality of recipe on the machine, all materials needed have to be Rare including the upgrade materials from this mod. I can pick whatever quality I want in the machines, which is weird. I have Multi-Step option disabled, I prefer the default option so I haven't touched it.

I have some quality mods, but just visual - Polygonal Quality Icons and Change recipe quality without re-selecting recipe. Tried that without those mods, same issue occurs.

This is an engine limitation. Recipes are specified without any quality and the system then adapts the recipe to the chosen quality at runtime. As of now I have not found a way to limit a recipe to a specific (input) quality, which is why you can choose any quality on the machine.

To upgrade from uncommon to rare quality you have to choose uncommon as the recipe quality on the Calibrator machine. The output will then be rare, regardless of what the recipe indicates.

Thank you for clarification. A small follow-up. When I choose rare or above quality, the Calibration Matrix/Reinforcement Package/Quantum Tuner have to be better quality aswell right? That kinda scales up a lot of stuff at least in my head. Is that intended or a effect of said engine limitation? It would be cool that you could use standard upgrade parts while having better quality precursor items.

That is also an engine limitation, but also became part of the design with increasing upgrade costs for higher tier qualities. A possible workaround would be using the upgrade parts as fuel in a furnace-like machine, but I chose not to go that route.