Actual Effect of Taking a Blacksmithing Potion

Nicer quality items have more components, so you can potentially get more parts out of them. The quality of the component is pre-defined based on what the item is.

For example, salvaging an Iron Longsword will never give you any other blade than an Iron Blade, while a Steel Longsword will never give you any other blade than a Steel Blade

It's random as to what and how many components you get, however higher blacksmithing levels will increase your chance at salvaging the item's components, so you'll likely get more pieces from it.

You can also save / load your game if there's a particular component of an item that you want, such as a life steal component, or mana steal.

My suggestion is break down all you can, and sell the rest.

At low levels, some of the items you find can't be broken down, so start by going into the blacksmith interface and breaking down everything on the list. Then mark as junk anything you don't want to keep, and sell this to a trader. I've been tending to keep unique and set items, personally.

Even if you break down an item from a class of items you don't use, there's a chance you'll end up with an element that you can use on a different class of items. Furthermore, I've gotten components from weapons and armor before that have better stats than the original item did. Therefore, even if the item is weak or the wrong class for you, you're still better off breaking it down.

If you've got excess weapon or armor parts that are inferior or you have no intention of using, you can sell them individually, although the value of these components is quite low compared to the original item. However, the items you're likely to able to break down aren't going to be worth much anyhow. Note also that armor and weapon components don't take up space in your pack.