I believe you are trying the concept of transferring Tier of cheaper item with Classifications 1 & 2 after fussing cheap items.
Let's do calculations:
Scenario 1:
Let's take example of Knife (category 2).
Let's say you don't pay for the item (getting it for free). To bring him to category 2 you need at least 4 items, 200 dusts. If you are succesful you will pay at least 800,000 GP for the whole process.
Now, you taking using Knife Tier 2 to transfer it on Demon Helmet you will need 100 dusts + 1 Exalted Core + 5,000,000 GRP to get Demon Helmet Tier 1.
To get the Demon Helmet Tier 2 we have to repeat process. Resulting in 11,600,000 GP (at least.) + 500 dusts (at least) + 2 Exalted Core. - This is only when you are successful through whole process.
Scenario 2:
Using Demon Helmets only:
You need 4 Demon Helmets + 200 dusts and only and 800.000 GP only if you are lucky and successful through whole process.
So it really depends on what you planning to upgrade. Scenario 1 (transferring tier) requires lots of resources (dusts and Exalted Core....). If it is really expensive/ rare item- it might be safer option, however, it must be really significantly much more expensive.