Basara gave a very thorough break down in his excellent explanation, but if you're really new or very recently returned I think I can break it down a little further.
The base damage of the weapon that shows up when you mouse-over first takes the true base damage of the weapon modified by STR and skills like tactics, anatomy (lumberjack, also, for axes).
That base damage is then multiplied by "damage increase" on equipment (divine fury also adds to the equipment DI, and it might be the only spell that does). This stat is what we are talking about when we say "damage increase" and is capped at 100%. You *always* want to be at 100 here, otherwise you are seriously limiting your dps output.
For simplicities sake, consider this base damage to be calculated from skills, STR and DI when you equip the weapon, not on attacking, and is the number shown on your weapon property gump.
Next is what we call "damage modifier" which includes slayers, enemy of one, quivers, consecrate damage's little bonus, and honor. This is capped at the 300% you were talking about in your original post.
That's why you dont need to use enemy of one or honor to maximize damage when using a lesser slayer, but why enemy of one does help when using super slayers. This is also why if you're not at 100 DI with equipment, you'll see an increase in damage using divine fury even when using a lesser slayer, why honor or EoO is so important with a super slayer weapon, and how EoO + Honor can negate the need for having a slayer at all.
Further I believe the extra damage chance from lumberjack and the damage bonus from provo masteries can exceed then 300 cap, but I may be wrong there.
After your base damage is calculated upon equipping the weapon, and all damage modifiers are calculated upon hitting a target, the elemental damage simply determines which of your enemies resistances your attack will roll against.
Damage increase is a bit complicated in UO and there are a good number of nuances involved. Thankfully it has been a much discussed subject on the forums so, as Basara suggested you have plenty material to look over here on the forums. If my post has straightened things out for you go back and look over the math in the previous post and hopefully it will click with you!
Also on an only slightly unrelated subject, try an ash runic w/out powerful reforming and see what kind of results you get for reforming those 100% elementals! I prefer ash, myself, you just gotta hope the extra property you may get is a handy one, lol.