Well what do we do? We can't do this:

type ItemsState = {
  // …
  update: (id: string, updates: Item) => void;
  // …
};

I immediately get yelled at in Item.tsx.

In fairness, it's not wrong. That's only a part of an Item.

It's time for a utility type!

Using Partial<T>

type ItemsState = {
  items: Item[];
  packedItems: Item[];
  unpackedItems: Item[];
  add: (name: string) => void;
  remove: (id: string) => void;
  update: (id: string, updates: Partial<Item>) => void;
  markAllAsUnpacked: () => void;
};

In the implementation:

const update = (id: string, updates: Partial<Item>) => {
  setItems(updateItem(items, id, updates));
};