The raving fan appears after you beat the lesser commander, looks like the marauders but bigger. It's a fight against him + 4 raving fans. The fan costs 1 follower point and his weapon can make others bigger in battle.
You can upgrade equipment by interacting with the anvil behind the blacksmith's shop. You need scraps, ores, ingots, essences, or ability crystals to upgrade stuff. Hope this helps~