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If you use a grindstone - I'm pretty sure the base damage goes up by alot more, since I have a Blade of woe (40 base damage) and a Daedric dagger (39 Base Damage)
Idd - I prefer Whiterun, as it is rather small, and I know where everything is, another one is solitude, since I bought a mansion there :),
I dont really like riften though, always quite dull there :)