What happens? (in General)

What happens if you put an item in auctions and then you BS it up a bit..what happens if someone bids and takes it?

Does it give him the item or does it cancel the auction or does it like cheat him? If no one knows care to experiment?

I don't know, but you can go ahead and experiment ;)

Alright I need someone to buy a leather armor thing when I say so

actually I'll do arrows

Don't bother experimenting. If you BS an item in auction, the winner will get the item with the boosted stats. The auction description won't reflect the new stats though as the description is created as you place the auction.

Huh? I was under the impression that items put up for auction are transferred to the auctioneer account, so wouldn't attempting to add networth to an item in auctions fail?

That's only for ammo. All other items remains on your account, until sold.

the blacksmith / forging will increase the item's stats.
you will still be auctioning the item.
the winning bidder will pay for it what was bid, even when the upgrade was done after the bidding.
the new stats probably won't be reflected on the auctioning page.

this can't be done with ammo, since ammo isn't kept on your own account while auctioning.