I have 100 smithing, and can make legendary items. Yet, with items such as Mehrunes Razor and Dawnbreaker, I can only improve it to flawless. What gives?

you will need around 196 smithing i think from potions/enchants. Still wont be as good as regular gear can be.

Do you have 100 Enchant? Then you can make a set of smithing gear to wear when upgrading.

feature made by beth to make artifacts svck compared to selfmade weapons. they tought this would be ok since anyone should wear deadric weapons at the end.