If you're doing manual repairs, you can let an item wear down to the point where you can't even equip it anymore. At that point when you do repair it, the item is fully repaired. There's no way to do 'levels of repair' or anything like that.
It doesn't really pay to do manual repairs anymore though. You used to be able to pay one fee to repair all the way back up to normal, but now the repair cost just accumulates so that when you do hit the repair button you're paying the full price times 4, 5 or however many times you let it slide.