My shrouded armor doesn't seem to go higher then Flawless even though my smithing is 100. I thought it might be because my light armor section wasn't completed but I maxed it out using the console to see if it would work. It still won't go any higher.

Does having a higher light armor effect how much you can upgrade your armor as well?

Enchanted armor cannot go to Legendary, only Flawless. At least as far as i know.

The only things that are supposed to matter should be your skill level and whether you have the appropriate perk for the kind of armor you're improving.

http://www.uesp.net/wiki/Skyrim:Smithing#Item_Quality

Smith first then enchant.

I crafted a leather armor to see if it would work with that and it still only went up to flawless. Doesn't make any sense, don't know why it's doing this.

Find or enchant some "fortify smithing" armor or make a potion for it.
Everything can go to legendary, you just need more than 100 in smithing.

If you're down with enchanting also... Find something that Increases Smithing by % This gear still helps when upgrading with 100 smith skill this sort of enchantment can go on Body pieces, Rings, Necklaces and gloves, There is also a pickaxe that increases smithing, all though I don't know if there is a bonus for going over 100 of a skill, Using gear I can get pre-enchanted gear up to Epic

Edit: Ah yea forgot the potions also, they will stack with the armor as well even with 100 smithing

I'm most likely going to resort to that, or use the console to get my smithing a little bit higher until I can get my armor to Legendary and then bring it back down.

Although the main thing that I don't understand is why it won't go to Legendary even though I have 100 smithing and all the perks available for it.

Do you have the smithing perks for that armor type?

Ok. Here's what you need to do:

1) Get Smithing to 100.
2) Get/Make items that improve weapons/armor by a minimum of 20% e.g. Ring of Eminent Smithing, Glass Gauntlets of Eminent Smithing, etc.
These items can be combined, so say you had a necklace and ring that added up to over 20%, that's fine.
3) Drink a Blacksmith's Elixir (you can buy or find these).

You now have a legendary item.

To improve items even further, if you get your Enchanting to 100 then get Enchanter 5/5 and Insightful Enchanter you can then disenchant any item that improves Smithing to get the Fortify Smithing enchantment.

You can then create Necklaces, Rings, Armor and Guantlets that improve weapons/armor by 25% for each piece equipped by using a Black or Grand Soul Gem.

The more pieces you have equipped, the better the armor/weapon will be. Even when it says "Legendary" that doesn't mean it's the best. Using one item that improves smithing upgrades by 20% and a Blacksmith's Elixir gets you a Legendary item. Using 4 pieces of 25% and a Blacksmith's Elixir makes a much better Legendary item.

If you add Alchemy into the mix, you can create potions to improve alchemy and end up creating Blacksmith's Elixir's that give a 130% boost instead of the standard 50% and Enchantment Potions that allow you to create items that improve smithing upgrades by 29% instead of 25%... but I'll let you look into that if you want to - I have not done it myself.

Oh, and no having a higher light armor skill makes no difference to item upgrades.