I'm trying to figure out how the loot system works in Skyrim - I've picked up the perk that is supposed to give me a 50% higher chance of getting neat stuff in boxes, but I'm curious about quest rewards.

Here's my theory:

1> Rewards are hard coded and they don't change regardless of when you get them.
2> Rewards are somehow tied into where you are in the critical path progression.
3> Rewards are tied to your character level and increase as you do.

Now I'm sure it isn't Option 3, but I'm not sure about Options 1 or 2...

Here's my example:


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So I've finally reached lvl 40, and have killed more Dragons than I can count. I completed quest to cleanse a Daedra temple and become her champion, given a weapon to use in her name, to bring her glory - awesome graphic, 14 damage sword (to give you an idea, the Hammer I use is 107 damage). Now to say I was massively underwhelmed by this quest reward is an understatement, and I really want to use it! It looks fantastic, but at almost 10% of the damage of my existing weapon, I can't imagine surviving using this toothpick in place of my trusty, skull breaking, sledgehammer. I'd really been hoping it would have been a two hander too :/

if your smithing is high enough you can upgrade the quaility of those daedric rewards. plus your 2 handed hammer is has also been buffed by the arms man perks im guessing and your 2handed skill is probably inthe 80-90 area while your one handed skill is probably only in the mid teens to early 20s

Yeah, I've got enough skill to upgrade it, but still... a base of 14 damage isn't really much to improve - I can't imagine it will be anywhere near as good as main weapon (which is a Legendary Daedric Warhammer). You're right about skills though, my 2handed skill is at 81 and my 1handed skill is at 17.

How much do you think it would increase the damage if my 1handed was comparable to my 2handed skill?