A bit of each I think. I believe it can fire normal bullets (and does more damage as the character levels up), can fire rune bullets that deliver spells, and can have spells cast through it. I'm a little fuzzy on the details.
Well, I'm not running a specific system, so think about how you'd like such a thing to work, specialties and limitations of it, and we'll chat about it. :)
If you don't mind me jumping in with a question,Steampunk!
What exactly is steampunk?
As defined by Wikipedia: Steampunk is a subgenre of fantasy and speculative fiction that came into prominence in the 1980s and early 1990s. The term denotes works set in an era or world where steam power is still widely used—usually the 19th century, and often set in Victorian era England—but with prominent elements of either science fiction or fantasy, such as fictional technological inventions like those found in the works of H. G. Wells and Jules Verne, or real technological developments like the computer occurring at an earlier date. Other examples of steampunk contain alternate history-style presentations of "the path not taken" of such technology as dirigibles or analog computers; these frequently are presented in an idealized light, or a presumption of functionality.