The problem isn't really that your friend is some sort of purist who has the wrong belief that Armada is not intended to have upgrades. It's really that HE doesn't like upgrades, and he feels he needs to justify that. I think it might be neccessary to gently call him out on that while pointing out that he doesn't actually need a reason beyond "I just don't like them." That's okay, and makes more sense. Don't get sucked into his argument about how Armada was "meant" to be; he's clearly just made that up with no supporting evidence, and it's not his real issue.

Now, is your problem here that your friend won't play unless you agree not to use upgrades? Is his insistance on this Platonic ideal of an upgradeless Armada a way to impose his preference on you? Because if not, then it's not a deal -- he builds his lists without upgrades and you are free to use them.

But I'm guessing that's not the case. So, I think your choices are:

1) Agree to play his way, perhaps scoring a moral victory by explaining that he's wrong about the true nature of Armada but because he's a baby you'll play his baby version of the game. 2) Compromise. Maybe only one upgrade per ship, or only one ship with u pgrades, or a point limit on them. 3) Tell him that you're going to use upgrades because that's just how it is. He doesn't have to, but you're free to and you will.

Each option can negativelt impact your friendship and/or Armada games, though number 2 might impact both the least.