Mad Memoires - Upgrade Slot
You’re correct. Upgrades of a particular level require the item you’re placing it into to be that level or higher.
Since this particular back item has no ML, the game treats it as 0 (or 1) and only allows the lowest tier of upgrades.
You will eventually get an equivalent back item (3 different stat combinations available, one that is identical to the event one) that is ML:80 by doing the personal story mission that you can place any valid upgrade into.
Lille of the Valley [WHIP]
you can transmute it with the lvl 80 back item from story, and then put the best jewels in it