1) The smith will make only one of each item.
Spoiler
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Hold on to your +3 katana and the adamantine. In chapter 3 you will get the chance to forge an even better katana.
2)Shadows of Underntide assumes you start with a level one character. It is possible to import a high level character but it would make the game too easy to complete. Hordes will set you to level 15; adding or deleting levels as necessary.
If you want more levels check
this thread where I found a way to get more XP in the Original Campaign