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What's the highest you can upgrade the Enhanced Dwarven Crossbow to?
I 'improve' all my stolen items - easiest way to increase smithing... Enchanting stolen weapons after that, iron daggers, steel daggers are the best with absorb health turns a 10gp item into a 200-400gp item. A bow with soul trap of 1 second is good for getting lots of charged soul gems.
What do I do with Habd's Remains?
there's a bug on PS3 if your get the remains before getting the quest, you can't finish it (perhaps once dungeon resets...) but you can do as you said and light the lighthouse, but the quest still says find the reason for the murders at the lighthouse... at least I don't have to carry around the remains forever.