I was just about to post a thread exactly like this. The conversion rate you have to be extremely inefficient to maintain balance, though: maybe a 5:1 ratio for upgrades? I'd make conversion available through Alchemy Machines, though. Much more convenient that way.
ok for orbs and fire crystals.
no for difficulty restriction. the only restriction should be the number of revives you can afford now. not a great one, but it's there.