Not an oversight, that's the point of the quest, to give up or not give up your armor to help someone.
Shouldn't be an issue since farming parts is very easy too. I had four+ sets upgraded by then.
Higher tier mats break down at a 1:2 ratio, should be less than 20 min to get it back up to where it was.
That obviously isn't the point of the quest since not everyone will be using that set.