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To disassemble an item, you would need to approach a Disassemble Expert NPC where you can find in most of the towns in Midgard.
You would need to purchase a catalyst from the NPC to disassemble your unwanted equipment to get special materials required for refining and crafting. Different level of equipment require different grade of catalyst to disassemble them.
To refine an equipment, you would need to approach the Disassemble Expert and click on the Refinement option. To refine equipment you would need Oridecon (Weapons) or Ernium (Armor). Place the desired equipment into the Refinement slot and place the required material into the Material slot of the window. You can choose to use Karnium to safeguard the item from degrading should the refinement fail.
There is also a fee to refine each equipment.
Drilling Holes on Equipment
To drill or make a hole in equipment to put the Runes, you need to have your equipment have a Blind Rune Slot. The slot are randomly gained when looting it from monsters. Slotted equipments cannot be obtained using crafting or such. Drills has its own level limit so use the drills well.