Nice idea, I have seen it in some games, and it is very fun. Although, all weapons should be able to upgrade, of course, within some limits and without breaking the game balance. I guess that changing it look is work for a blacksmith (yay ^^) and even upgrade, what would be nice is something like bonuses. You have a great proeficiency (dunno how to write it T_T) with low-level daggers, so, you would get damage bonuses with them, maybe even speed bonuses, since you already dominated the way they are used (attack, strentgh required, etc...). That could make a player better with a low-level dagger than one with a high level ubber rare one, as long as the first dude had used the dagger a lot (like 100.000 times) and the second one, none. I know it is not very easy to understand, since my english is awful.