I'll try and cover the modular bits on Wednesday. The short form is that modular parts reduce the capacity of the arm significantly, which in and of itself *should* have made the issue moot, but, armor slipped through. I'll have to get that corrected in the official read.
A modular limb with removable parts has teh overall Capacity lessened by the removed part, plus a tad more for the modular connector. A full modular arm which has 15 capacity that has a modular elbow will then have this setup:
FULL ARM - Capacity 2
LOWER ARM - Capacity 10
If you add a modular wrist to that, you get:
FULL ARM - Capacity 2
LOWER ARM - Capacity 5
HAND - Capacity 4
If you have a partial modular limb with a modular wrist, you get:
LOWER ARM - capacity 3
HAND - capacity 4
Any upgrades you take on the "higher" part of the limb "flow down" to the rest. Thus, if you take +2 Str on ther Upper Arm, that strength boost 'flows down' to the rest of the arm. This applies to Agility and Armor as well (Thus, Rating 3 Armor on the upper arm 'flows down' to the rest of the arm.)
You don't have to buy the "higher" upgrade for the lower, but this also means that you can't stack upgrades (+3 Strength upper arm, +3 more lower, +3 hand, I AM AN ARM-WRESTLING GOD!) ... they're already "there", so you can't add more.
The main use of a modular limb is to switch out parts. You might have a gun hand with an Agility boost and a gyro-stabilizer, a 'melee hand' with a handblade and a strength boost, a flamethrower hand (because that's just cool), and a synthetic hand for socializing. (Yes, synthetic parts can be modular, but they're clearly not going to pass for the real thing when you've switched them out for a tool!)
If you just take a modular joint (Shoulder, elbow/wrist), then, yes, you lose Essence for the limb that attaches to it, but that whole limb comes with standard Capacity, instead of the modular versions which have a little less. In return, you pay a lil' more Essence. (Thus, if you take a Modular Shoulder and a CYberarm, you gave up 1.3 Essence, but your limb has a full 15 Capacity, rather than the reduced level a Modular limb would.)
So, modular joint + limb = more 'power' at a greater cost, modular limb = less powerful but less Essence.
Hopefully, this makes it more clear? If not, keep the questions flowing.