So I was hoping to get something cleared up about the Fists of Steel perk. It says that the armor rating becomes the damage of your unarmed strikes (not the exact wording I know). However I have read conflicting reports, some say that it is exclusively the base armor rating of the gauntlets while others say that tempering the gauntlets with smithing will increase the damage. I would like to know which is true, is it the base armor rating and the damage is not affected by me upgrading them to legendary tier or will tempering the gauntlets actually boost my damage so it could be like 150 or 200 like the armor rating says?

http://uesp.net/wiki/Main_Page tends to be the best place to read up on game mechanics; the Skyrim Wiki isn't nearly as reliable. UESP says that it is the unmodified base armor rating, no smithing, perks, or skill. There might be a mod that changes it, though.

Yeah I have read the UESP and that was what sort of killed some of my enthusiasm for it. I play on xbox so sadly no mod options. I remember being able to use smithing and get the armor rating nice and high and was excited about being able to use that as the damage output. But alas if it is not the case then realistically I will probably be done with skyrim.

All you can do for unarmed damage is being khajiit, fortify unarmed apparel and the fists of steel perk. However, using all three with good gauntlets and high level enchanting with perks can get you pretty far.