I've read that the units can be customized, do they mean you can change weapons or do they mean the units themselves(i.e. change other parts like heads, arms, etc.)?

no the parts and weapons are all the same
you customize a gundam by upgrading the parts to enhance attack and so forth
you can also add special abilities to parts such as
aura burst which damages enemies when you boost

does anyone know how to upgrade the armor gauge? i sent my Musha gundam Mk II in the lab like 20 times, its armor highest is 400.... BOO!!!