Grand Magister Jurek:
To enhance a weapon you must first gather a certain amount of souls that possess magical powers.
You must collect the souls of these evil creatures and place them into a Soul Crystal. Then take the crystal to a blacksmith who will extract the souls and apply them to a weapon, enhancing it.
All blacksmiths know how to do this.
You will find the evil creatures whose souls must be collected in the north part of Oren, the Forest of Mirrors, the Cave of Giants, the Devastated Castle, the higher reaches of the Tower of Insolence, deep within the Lair of Antharas, Eva's Underwater Garden and Devil's Isle etc. An enhanced weapon will greatly improve your strength.
"How do I collect the souls?"