Well, for starters, you can't upgrade tenebrium weapons to my knowledge.
You can upgrade a regular bow's damage by dragging a bowstring on top of it. Bowstrings are created by dragging and dropping a sinew on top of another sinew.
You can also put a scope on a bow, or whatever that scope thing is called. (It looks like a scope.)
You can drag and drop (it's all dragging and dropping) a ruby onto body armour or a helmet. As far as I know those two objects are the only armour pieces that can be combined with a ruby, in order to get +resistance to the four elements. But I can ofcourse be wrong, since the crafting system is a gigantic mess, and I can't keep track of the countless recipes.
I have no idea how to upgrade a two-handed warhammer. Actually, I don't recall ever seeing a two-handed warhammer in the game. :S
It's not hard to figure out how crafting works, just take one item and drop it on top of another item. If they combine, you'll either see a message that your crafting/blacksmithing isn't high enough, or you'll see the items combine.
It's still a piece of crap system though. Larian should do a huge crafting overhaul.
