How, given that " Docked ships (and their equipped Upgrade cards) are placed to the side of the play area, and are considered to be inactive for all purposes" arethe phantom titles able to have an effect?

That is a very good question, but the answer is simple:

Because FFG Say it works

Honestly RAW you are correct the Phantom titles don't work, there is a minor argument to be made that they fall under the "Golden Rule" but that's a real stretch.

Realistically the way everyone plays the cards is the intended use of the cards, but the fact that the rules in theory prevent the Phantom titles from doing anything is really amusing.

Edit:

I'm totally gona pull this one out next time I play against Kanan Fenn at the local shop, should be a good laugh

Because otherwise they wouldn't work at all, and entirely nonfunctional cards are not something this game includes.

But really, they're poorly written and should have some specific exception included, or the text of what they do actually included on the Ghost card, but FFG.

The Phantom title is a null-value title. So perhaps it doesn't count as an upgrade card? IDK man, just taking a stab at logic.

The titles as written specifically provide their function "while you are docked" and whenever a card specifically contradicts a general rule the card wins.

That is exactly like in Magic the gathering, where card have no effect in graveyard, except when the card state: When in a graveyard, this card do X

The Phantom title specify that it as an effect when docked, so it work.

Because the Phantom titles include the specific exception: "While you are docked" and cards override rules.

You might as well ask how Tycho gets to performs actions when he's stressed. The rules say you can't. The answer in both cases is the same: cards override rules.