We analytically show that inserting a driven, two-level system inside a microcavity can improve its optical properties. In this approach, the strong dispersion induced by a pump via population oscillations increases the cavity lifetime experienced by a slightly detuned probe. We further predict that if the cavity is pumped through a resonant channel, optical absorptive or dispersive bistability can be combined with the population-oscillation-induced steep material dispersion to obtain a strong quality-factor enhancement. Moreover, differential amplification coming from the nonlinear feature of the pump transfer function can be used to drastically increase the probe transmission beyond intrinsic characteristics of the resonator. The Q-factor enhancement and the differential amplification can be advantageously combined with a frequency pulling effect to stabilize or readjust the microcavity resonance frequency.