Okay, so do you have the upgrade hut? If so, that would indicate, you already have the upgrades, if not, you need to go to the "build" section in town hall, and buy the upgrade hut if you can. I think it required a basic gemstone or two, I could be wrong-
I'm currently in the process of making a comprehensive game guide since I got the steam version so I could write a guide, though you'll have to forgive me as I can't currently access my old save at the moment to check a lot of things, because I deleted my old F95 version and am currently replaying using the steam version. So I'll have to get back to Mistral Village before I can confirm or deny anything. I should be able to reach close to where you're at by the end of the day to answer any questions you may have.
The most important thing to remember about gear, is unlike weapons, accessories, and blessings, armor scales attack exponentially in a way-
That's why it's so much more expensive than other equipment, each tier of armor may not seem very impressive on face value, but the primary factor that determines if an armor is tier 1, 2, 3, etc. is actually how much attack it grants you, and of course it's other effects, but you'll rarely find any item that boosts attack anywhere near as much as armor, because your attack scales exponentially, not linearly, a high attack stat will always be more powerful than an equal defense stat due to how damage is calculated.
Try and get the best armor you can that both fits your play style, while also being the highest or second highest available tier.
The stuff about Little Shroom was because you'll actually unlock the blueprint for the shotgun once you reach Little Shroom, though you obviously need to have access to the upgrade hut for that.