I would think it is quite possible, but one has to test it to really know. I haven't modded in a long time, so take my words with a grain of salt.
The first step is to change qualityinfo.xml to add more quality levels and the colors shown for them.
Then change all the items you want with higher quality levels:
1) Check if that item in items.xml has lines like with "tier=..." in it, those lines refer to quality level. Example:
<passive_effect name="EntityDamage" operation="perc_add" value=".1,.5" tier="2,6" tags="perkMiner69r"/> <!-- tier bonus -->
--->
<passive_effect name="EntityDamage" operation="perc_add" value=".1,.9" tier="2,10" tags="perkMiner69r"/> <!-- tier bonus -->
Even those where you don't want to have changes for your added quality tiers you should at least specify the tier, otherwise the line would be ignored for your new levels. Example:
<passive_effect name="ModSlots" operation="base_set" value="1,1,2,2,3,4" tier="1,2,3,4,5,6"/>
--->
<passive_effect name="ModSlots" operation="base_set" value="1,1,2,2,3,4" tier="1,2,3,4,5,6,7,8,9"/>
or
<passive_effect name="ModSlots" operation="base_set" value="1,1,2,2,3,4,4,4,4,4" tier="1,2,3,4,5,6,7,8,9"/>
AFAIK the two changed lines are equivalent because the last value in "value=..." is just continued, if there are more "tier" than "value" values, but the latter line is safer if you don't want to test it out.
Next you need to make sure that the items can be found. Check out loot.xml and add some lines below the line "<!-- *** Loot_Quality_Templates -->" so that starting at a specifc lootlevel you will find your new quality levels, example:
<qualitytemplate level="140,149" default_quality="1">
<loot quality="1" prob="0.426"/>
<loot quality="2" prob="0.313"/>
<loot quality="3" prob="0.33"/>
<loot quality="4" prob="0.448"/>
<loot quality="5" prob="0.643"/>
<loot quality="6" prob="1"/>
</qualitytemplate>
-->
<qualitytemplate level="140,149" default_quality="1">
<loot quality="1" prob="0.426"/>
<loot quality="2" prob="0.313"/>
<loot quality="3" prob="0.33"/>
<loot quality="4" prob="0.448"/>
<loot quality="5" prob="0.643"/>
<loot quality="6" prob="0.68"/>
<loot quality="7" prob="1"/>
</qualitytemplate>
This means that starting with your lootstage 140 you would have a very small chance finding quality 7 level items. I.e. multiply all previous roll-fails (1-0.426)*(1-0.313)*(1-0.33)... and you have the chance to find a level 7 item instead of a lower level item at that stage
If you also want to add it to trader inventories, check out trader.xml and make appropriate changes there too