Let's say I can level up in the middle of the round (with the help of sabina).
I happen to choose to upgrade a color that I already discarded/played in a previous turn. Does the new upgraded ability appears in my hand or counts as a discarded card?
When you level up, you simply replace a card with a new one.
So if it was discarded - it remains discarded. If it was in your hand - it remains in your hand. If it was played, but unresolved yet, the new card replaces that unresolved card.