So am I to understand that , for example, iron swords cap out at level 14 and I basically need to use the next material to create a higher level weapon, like steal. That level 14 iron weapon could be upgraded all the way to legendary, but that would be pointless as it wouldn't the as powerful as the better material weapons.

This holds true with armor also right?

I kinda figured this out once I found no enchants for level 14 items on the guild store, mainly cause it's a waste as you need to be creating upgraded materials for higher level weapons,