If you set the game to automatically remove functional components, and upgrade a core ship, it actually strips *all* the components, so you see a bare shell.
If you set the game not to automatically remove functional components, and upgrade a core ship, you can remove the functional components one by one to get the space back, but the removed components don't actually disappear from the ship as displayed. So you end up with non-functional engine graphics, etc.
Also, sometimes core ships show functional things that are not really there functionally -- like 2 colony modules when there is really only 1. It seems core ships can use functional components as jewelry.
It would be nice to be able to strip all the functional components (working or not), keep the real jewelry of core ships, and then add functional components.