I have invested in the first smithing perk (steel) and have decided to stay with steel heavy armour for as long as I can to save money, what's confusing me is that you can make it twice as good.
At the moment I can only make it superior and before I ever took the steel perk I could upgrade it to fine, is that it? I read in a post somewhere that a player had exqusite armour, is this correct and how do I get to improve my armour to that if it is true?

I wouldn't know heavy armor, but when I went light track I got exquisite until I got to glass, which when upgraded went to epic instead of exquisite.

I can make both Legendary and Flawless weapons and armor but I don't know which one is better nor can I pick between the two. I'm a level 100 blacksmith
You Improve your wepons and armor by leveling up and picking the related perk. Read the perk description and it will say that you can improve them more

You are capped at a certain upgrade level unless you take the perk, which lets you go higher. The level you upgrade an item is based upon your smithing skill.

i.e. if you have a skill level of say 20, you can make 'fine' iron items, when you get to 100 you can make superior. if you take the perk, 20 gives you superior and 100 allows for up to exquisite (up to Legendary for higher armors)

p.s. these numbers are arbitrary and used to make a point, they are not exact formulas as I don't have my guide in front of me right now to look at the grid in there.