At your level no, Your better or making a new one as it will normally gaining levels and xp quite fast early on.
Later on when you start enchanting you can make items indestructible.

Good news i can make indestructible item later.

Is level cap about item ?

If your level 20 you will make a level 20 axe. However when you start using workbenches and furnaces you can add runes that make items allot higher level than you are.

On Day 3 or 4 ( deepening on difficulty setting ) You will start seeing fire demons, You cannot kill these creatures and you must run. If you persuade them to go into water you can get some good stuff of them.

Thanx for fire demons advice.

I killed one in river + another squeletton archer.

They don't like water.

Is there way to terraform land ?
Making soil, water where we want ?

Yes, you can plant soil, sand and clay block that match the surface.

Water will flow if there is somewhere to flow to, so you can dig a trench and it will follow.

I did experiment with picking up water blocks and putting them anywhere you want but it put too much strain on the game, Might look at it again.