So one thing i dont get with the new legendary skills in the 1.9 update is, do we lose our effectiveness with that skill when it becomes legendary or are we still as good with it and improving it?

It's pretty much a skill reset, so yes you lose your effectiveness.

oh, i get it now you can go beyond 81 right?, hopefully im not getting mixed up

See this thread for an explanation of the new Skill Levels

http://www.gamesas.com/topic/1447653-what-does-everyone-think-about-the-new-level-cap/

There are several other threads on this in that section.