I have parts to use as upgrades like meteors and armor parts but see no way to do it. I've looked in my meditate area and the smiths in town I've found. I see no options to do it.

Double Click

You should be able to just double click on the upgrade. Make sure that what you're upgrading has free slots for upgrades, though. Free slots for upgrades show up as empty circles to the side of the weapon/armor in question, and used slots are filled-in circles.

I've always dragged the item over to the item to be enhanced. I should try the double click method.

Beware of double-click upgrading with runes, it may arbitrary chose the wrong sword if you have free slots in both ones.

I just drag the upgrade I want over to what I am upgrading and then just click yes when the window opens that asks if I want to upgrade the item. As to crafting new stuff, just go to the Black Smith in Flotsam ( he also crafts armor ).