I think this is intended and I totally understand why. If Steel swords upgrade did not benefit things like Cannon Towers or Dwarven Towers there would be barely any reason to upgrade it. Why? Black Gunpowder does basically benefit 90% of you units and in addition it would benefit your towers, both as Dwarf but also as Wildhammer or Dark Iron. So only real purpose to upgrade Steel swords would be to give your melee units (Bear warrior and Dwarf footman) some extra damage. Which is not their purpose, yeah the damage is good but their main role is to be a tanky unit therefore Steel swords would be less worth than upgrading you melee armor, your ranged armor or even the armor of buildings (it benefits tanks & towers greatly). Magic damage shares a similar paradox here, why would we even upgrade magic damage as Dwarf? It only benefits with some extra dps your dwarf shamans which, again, are not intended for dps but support/utility. Upgrading it would be a matter only if we longer have money issues and fully upgraded elsewhere. And to be honest, I think I would still make 12 Riflemen than upgrade magic to level 3 that do have the same cost roughly. Other factions are based on this same principle also to avoid ranged/magic upgrades to be prioritised by everyone.