well, monsters can only drop items up to 10 levels below them (ie a lvl 40 monster can only drop up to lvl 30 items)
so if you toss in a lvl 30 item, it will spawn a lvl 40 monster (that is also using what that item will be after you kill it ^^")
if you are below lvl 40 and toss in a lvl 30 item, it will stil spawn at lvl 40, which is painful
if you are above lvl 40 and toss in a lvl 30 item, it will spawn at your level +1
so ideally you wil want to well that lvl 35 sword at exactly lvl 45...but it is possible after 45 too. before lvl 45 would be difficult
hope all of you who are slashing read this, it's pretty much a paraphrase of insanebobb's guide to welling