Well I don't see why it couldn't be done. Example 1 is just an example of any smithy, though the devs may decide to force the player into picking more specialized forms of a smithy (like having a Weapons Smithy versus an Armory).

As for Example 2, that depends on what materials are going to be present in-game. For instance, the Civilization series forces players to just get a hold of a source of copper in order to produce bronze weapons rather than having tin resources as well. I think it would be an interesting mechanic if some of the higher end recepies would require a combination of raw materials to yield a special weapon or armor which could then be produced and shipped out to the player's other cities.

I hope that a lot of items like this are not hard coded but determined by script so modders can go nuts with it.

My wish would be a hard coded game framework (Network, Graphics, Sound engine), that runs a scripting lang that does everything else.

Sammual

Diamonds. The hardest metal known to man!

The system described sound slike building blocks. I want a horseshoe so therefore I need a pickaxe to get ore, a smelter to make metal, an anvil and forge to shape the metal. And I need trained people who know how to operate all of the above.

This only has to be as complicated as you want it to be but if things are too simple they start to become confusing because things don't make sense. Maybe your smithy might be making horseshoes and needs no source of fuel whatsoever.

Yeah, but that doesn't count magical metals because....    because diamonds are totally a metal ;;;;   Uh, a carbon metal maybe? ... uh...     well, I'm sure in a world of magic they can figure out how to mix metal and diamonds to create something as hard as (or harder than) diamonds but as tough and durable as metal (since diamond armor wouldn't work with how britel it is)

I'm down with the use of materials for high end stuff.  I think that would be an interesting dynamic to the magic item creation process that would come from the master of magic game.  Like certain magical items or effects can only be created with the right materials available perhaps?  The catch I see is balancing what could happen if there is too much monopolizing on certain busted materials.  

I think it's going to be a tree for metallurgy and a seperate one for weapon design quality if the tree's going to have enough complexity to warrant that level of detail, or maybe I'm just projecting my bias on how I think it should be done, in which case, that's a suggestion to give the player a choice between a long, research intensive metallurgy tree with a lot of levels that provide a small bonus to most things, or a tree that lets you focus on one thing for a fairly large gain that is less efficient to overall progression than metallurgy, but is way more focused so you can grab an advantage in a few areas.

Personally I think more of, "fire-elemental-gems + steel = cooking oven"...

But yeah, I like your idea.