I remember reading a short story about a billionaire hiring a scientist to help him build a simulated world where virtual entities are given the ability to open the bodies of their peers to tinker/upgrade them as a replacement of natural evolution since they were immortal.

This looks very similar to that in a way.

I wonder however if a model can give itself a "skill" or capability that it didn't initially have, just be modifying its own weights.

Here, Astra was able to intervene because the treated model was way less capable. But, would it be able to improve Fable's performance for example, since they both are on the level more or less?

"Crystal Night" by Egan? https://www.gregegan.net/MISC/CRYSTAL/Crystal.html