I believe you misunderstood their request. They want to change the cap FROM 100hp to higher numbers, probably to prevent exactly what you stated.
as for the first request, there are many rpg games where you can take 2 weapons of the same exact type, craft them together and the result is a +n versoin of the weapon, or a new weapon. If i can remember correctly, Two Worlds does this. For example, If I take 1 copper short sword, and craft it with 1 copper short sword, I get 1 copper short sword +1 with +5% base attack power. if you then go on to take another copper short sword and combine it with the copper short sword +1, you get a copper short sword +1 with +6% base attack power. or you take css +1 and css +1 and you get a css +2 with +8% bap. maybe not these exact numbers, just trying to illustrate the concept.