MMORPG.com has a small article on the modification system in SWTOR.  At this stage of the game, very little is known about this system, how it will work, and how dynamic it will be.  The article concludes that Bioware has not made a decision on how this system is implemented and may change the current modification system in beta before launch:

“The reason for the inconsistency in BioWare’s comments on the Item Modification system has to do with the fact that the system is actually in flux at the moment, which is apparently why we don’t have concrete details on it just yet….  This means it is likely that Daniel Erickson was referring to the item modification as it is currently implemented in Game Testing, not necessarily the final version of the system.”

I am hopeful that the modification system is one of the areas that Bioware is intently listening to feedback from the beta testers on.  It would be nice to see a system implemented in the game that was the direct result of the wishes of the player base.