1: Dragon skills can't go above level 5. Dragon armor pieces don't have stat requirements that I know of or have seen. Are you sure it is dragon armor (Bone, Chainmail, Crystal, or Plate)?
2: Although most skills can be increased three times (from Lv5 to 10, 13, then 15), some max out at 13 or 10, and some at Lv5 (and thus those can never be increased). Way of the Ranger (and other damage/defense boosting buffs) max out at Lv5.
3: Malachite Gems are used in enchantments, just like other gems (Diamonds, Moonstones, Aquamarines, and so forth). They are used in most Lv10 enchantments (and the ones they aren't used in are usually inferior), and in all 10 levels of the Healing Aura enchantment. Two are needed to complete the Sight for Sore Eyes quest, earning you two skill points.
