This is a fantastic idea and if Aric is too busy I would be happy to work on it after I finish the hybrid work. I haven't looked at your code, but it should be fairly straight forward to create a system to craft and break down items. I can envision a system somewhat like WoW, where you can break down magic items for raw magic ingredients, and then use mundane items, magic ingredients and spells to craft new gear. Item values could be dynamically derived from your magic affinity stat and maybe even a new item crafting skill (one which slowly goes up as you use it). As for the GUI, that should be a simple matter of coping the alchemy panel and then making some modifications. Likely also want to add a new mansion upgrade path (maybe Forge).
Pallington, if you are ok with me expanded on your code I will look into it next week.