This is a question to game mechanics gurus.

After completing his quest, Gray Prince gives a permanent +3 boost (Fortify, as far as I understand) to Blade, Block and Athletics. I don't quite understand how this boost work, and how it will affect further skill leveling and level-ups. Currently my skills before turning in the quest are as follows:

Blade (minor) 100
Athletics (minor) 82
Block (major) 74

After turning in the quest (reloaded the save though until this gets cleared up for me) Blade becomes 103, so that is my first concern - could my blade skill become somehow broken? As for Block, it went to 77 without adding level up points and without giving the Expert message pop up, so I don't even know whether whatever perk comes with Expert is unlocked and activated; also would I technically (not that I plan to, but I still want to know) be able to bring it to full 100, gain proper level ups as it's my major skill and unlock Master perk? As for Athletics, will I be able to reach 100 and unlock Master perk?

I hope, someone can explain this and perhaps give some tips on when and how I should turn in the quest, in order to not screw up my stats.

Thank you very much.

PC, 1.2.0416, no add-ons, no mods.

The ability "floats" above your normal stats -- so the skill improves as if you had actually increased the skills each by three points*. Skill value doesn't really matter unless it goes over 255, where it's start looping around. However, you will potentially lose "level up points" -- since you can't increase a skill past 100 naturally, the ability prevents leveling the skill three points. You need ten skill-ups to increase level, so your maximum level may be reduced -- if such a thing matters to you.

*Perks for skill gains may not be present, but should appear -- though likely without a message -- when you next gain a skill point.

Your blade skill is not broken. Gray prince's reward is a base skill increase so it can push your natural skill past 100 cap (you can also push your natural skill by casting drain skill spell before going to trainer). Note that there's a bug where it won't increase XP even if it's your major skill (fixed by http://www.uesp.net/wiki/Oblivion:Patch#Version_1.1.511 patch). However, having a blade skill higher than 100 is meaningless since damage calculation applies a cap of 0-100. On the other hand, raising your Athletics or Acrobatics skill past 100 will make you run faster/jump higher. Also keep in mind that if you try to increase your natural skill past 255 it will go back to 0 (Not that you can do this without mod, but I thought it worth mentioning).

Technically the skill boosts are added as "abilities" and not "fortifications" (like with the Skeleton Key).

That means that the boosts count towards your natural skills.

So if Blade was 100 it will show as 103 after the reward. If you Blade was 97 it would show as 100 after the reward and you would not be able to increase it further (because you can't level up a skill above 100).

The only skills that show an effect above 100 are Athletics (faster movement) and Acrobatics (higher jumps). So technically the only skill that will benefit from the reward in the long run is Athletics. Because blade and block above 100 have the same effect as if they were at 100. Of course if you are below maxing everything out, the reward could help.