Handicraft I recommend capping at 50 after maxing out Rhetoric (quest options, extra quest rewards, makes buying and selling really easy method of making money when combined with +better price items). Afterwards, do whatever with your crafting points (Alchemy and Enchanting scaling seem broken, with players who tested ridiculous high numbers like 800 enchanting show there is scaling, but it seems to be balanced really badly).
The best weapons AFAIK are Aeterna that you self enchant after refining them (reports say 50-100 is a minimum increase for handicraft damage, like 1-2 points, so don't bother unless you've somehow maxed everything else), and at least two or three uniques, spoilered below if you prefer to surprise yourself (spoilers only tell what they are, not where to find them):
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- (Lightbringer unique 1-handed sword, 1 less damage than an Aeterna Mace, in one of the game's hardest areas, Black Widow's Elegy Greatsword [on one NPC or crafted via wishing well reward recipe] which matches Aeterna Battleaxes, and Commander's Greatsword which boasts the highest damage in the game, on 3 enemies in total).
The armour sets are definitely the best thing to have in the game over crafted armour.