http://www.uesp.net/wiki/Skyrim:Smithing#Item_Quality

"With a base skill of 100, the relevant perk, four 29% enchantments, and a 130% potion, one's effective skill equals 874.84, which yields a bonus of +92 to armor and +46 to other items (Legendary 26)."
'Legendary 26' means the 26th level of Legendary.

Weapons can theoretically be improved infinitely through the improvement ranks.
Fine, Superior, Exquisite, Flawless, Epic, Legendary 1, Legendary 2, Legendary 3... etc.

So, if you're using a weapon improved to Legendary 26, have all that weapons damage boosting perks and are using enchantments to boost the weapon damage... Yeah, damage can get pretty silly.

You're not going to get into the thousands of damage without exploits. You can make some pretty mean weapons, but not in the thousands. I really don't understand Flounce's formula, I've read the page over and over and I can't figure it out. Anyway, 100% in smithing, 80% in one-handed, two pieces of enchanting gear, and one potion of fortify enchanting, the best daedric dagger I could make was only around 100. Even with two more pieces of enchanting gear and one-handed up to 100%, I doubt I could get it up to 200 damage. Swords do have the bladesman perks to help out, but I seriously doubt anything over 500 is possible without an exploit.

I recall a friend of mine was getting set up to one hit kill Alduin (2.2k+ health) by exploiting how powerful he could smith weapons. That was on Skyrim vanilla, of course, so they must have adjusted it. Thanks guys

http://steamcommunity.com/sharedfiles/filedetails/?id=183300860
1,451 damage Daedric Warhammer :D

And that's without exploiting any actual bugs. I mean, it's definitely exploiting stuff. But I didn't do anything the game was funny about.

Enchanting, Alchemy, Smithing and Two-handed all at 100 with the boost perks.
You use enchanting to make yourself better at alchemy and alchemy to make yourself better at enchanting. Then just spiral that upwards untill it caps your enchants/potions.
Then, you use alchemy AND enchanting to be better at smithing and two-handed.
Easy... Long winded, sure. But easy.