Problem: It's a pretty well known "word of mouth" fact that a level 1 5* weapon is weaker than a level 10 4* weapon. If you did not know this, blame OOO for not warning you about this damage reduction risk when "upgrading" your 4* weapon.
What's lesser known is "what level does it take for a 5* weapon to catch up/surpass a 4* weapon?" The answer is not pretty. The gist is that this cut off point varies by depth, generally somewhere between level 8-10, where the cut off is at a lower level in later depths.
But this usually means needing to get significantly more, significantly rarer Radiant Fire Crystals just to meet the damage threshold of the 4* weapon counterpart.
Here are some fun numbers I collected this weekend using my newly crafted Biohazard line:
T3 Guild Training Hall, Slime punching bag (weak to shadow)
Attack +5 (Black Kat Cowl + Chaos Cloak)
Damage Numbers:
Level 10 Virulent Catalyzer (4*): 198
Level 1 Biohazard (5*): 150
Level 6 Biohazard (5*): 171
Level 9 Biohazard (5*): 194
Level 9 Biohazard still weaker than Level 10 Virulent Catalyzer. Much dislike.
Solution:
Simple change: Without changing any of the final damage numbers, have the Level 10 4* Weapon cap out at 150 Damage (the level 1 5* damage, basically). This negatively affects early T3 players the most, but it makes the most sense and is seemingly easy to implement.
Harder change: Balance out the damage distribution of the weapons so that it is much more apparent that a 5* weapon is a true upgrade to a 4* weapon. Maybe cap out Level 10 Virulent Catalyzer at 170 damage and have Biohazard start at 170, for example.
What the f...
I knew the difference is high, but I did not know that it is THAT useless. Therefor I do totally regret to upgrade my Catalyzer into a Biohazard (actually still level 3). The loss of CTR is pretty noteable there.
I recommend your first option though: better cancel the damage of a 4* weapon instead of buffing the 5* stuff.