pickaxe and sword damage should not decrease when you try to "upgrade" it.. let the crafting of the new weapon fail to keep the old one instead of changing it to a worse one..
Same problem like in sep. 2012 - it says you need to graduate before going to the super pet arena but i already graduated.. since the developer knows this problem since 1.5 years i dont think this will ever be fixed..
It is possible to get treasure chests. Once you raise the % for that you'll have plenty of coins.