im assuming its because i got it at a somewhat low level but im just wondering if there are darker forces at work here.

I wish to, I love that sword

I don't think you can upgrade it beyond that. http://www.uesp.net/wiki/Skyrim:Dawnbreaker yep it can only go to exquisite.

that blows. its the perfect weapon to use since im joing the dawnguard with my dude.

I have a character joining Dawnguard while using dawnbreaker too!

I'm joinin the vampire lords first though.

It's not classified as any material, so the perk for smithing a material to Legendary doesn't affect it.

im going to with another character but i havent decided what kind yet. my main is a stereotypical nord warrior and also a werewolf so its my destiny to kill all vamps

I'm going to re-model my Imperial Battle-Mage so he looks more evil then join the Vampires. Meanwhile after that I will create an Orc and join the Dawnguard.

You could just fortify your smitging skill to get it to (and past) legendary.

It isn't affected by any smithing perk bonuses, therefore it lags behind in upgrades.

I have no need to smith weapons (why would I want to one hit everything?), so having no perk in smithing for Dawnbreaker isn't a concern. It'll be a great weapon to use on the vamps in the dlc that explosion effect is awesome, way more fun than any of the death cam things.

Here's a useful link - http://www.uesp.net/wiki/Skyrim:Smithing- scroll down to the item quality table.

You need a smithing skill of 168 without a perk that corresponds to your item (most artifacts are unaffected by smithing perks), only 91 if the item is affected by a smithing perk.

You can raise your smithing level by fortify smithing enchantments or fortify smithing potions, both can be found in shops.