I'm figuring it out myself as well atm... I agree upgrade quality first then rarity makes sense.
If you have the patience, watch this... https://www.youtube.com/watch?v=al3RSBJqUlc

Upgrade rare to legendary is expensive, but you get back the same item type so it's good for upgrading a specific gear slot. All properties are rerolled when it upgrades however, it doesn't just add 2 or 3 extra ones.I think that project is meant to be used when we are a high level, at least 70, and already have good legendaries in most of our gear slots. Transmogrify legendary is cheaper and completes more quickly, so i would recommend this project instead at first to change legies that are not useful to your build. It's a complete gamble though, you will always get back another legendary but it's type will be random and ofc will have completely random property rolls.