Building a Better Masterwork (3.5e Variant Rule)
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 A Small Tale...
By Amhairghen Faithliaig.
Lord Brodmin looked down at the scrawny merchant, who seemed to squirm somewhat under his gaze. “Did you manage to fill my order, Gallen?” he said.
The merchant responded with an oily smile. “But of course, your lordship. I have it in the back; if you would care to join me?...”
Brodmin needed no further invitation. He swept around the side of the stall as if he owned the tent beyond, parted the flap and strode inside, followed closely by the merchant Gallen, who closed and secured the flap as he entered, sealing it not only from casual view, but also from all manner of eavesdroppers. It was a marvelous tent, and he had long since ceased regretting its cost.
“Well?” said Brodmin, “Where is it? I do hope you aren’t just wasting my time, Gallen. I cannot abide having my time wasted!”
“Calm yourself, your lordship,” said Gallen, grabbing a silk-paneled box from under a pile of rolled-up rugs, “and behold, a wonder of the world!” His voice had now taken on the silken tone used by merchants everywhere, most notably when they are sure of a sale. And then he opened the box.
“An adamantine rapier, forged from triple-refined metal and to the third degree of mastery, created by the great elven master of bladesmiths, Heirinal Galanodel. Signed and marked at the base of the blade, as you can see. I assume this satisfies, your lordship?” He now wore the amused smirk known to all paying customers, the one that roughly translates as “Gotcha!”
“Perhaps, perhaps, my good merchant,” said Brogmin, though it was clear to both of them that the deal was as good as done. “And what were you thinking of taxing me for this little beauty? Houses, lands, jewels perhaps?”
“Oh, those and more, your lordship. For I’ll not take less than four hundred thousand pieces of gold for this beauty, and you can say of that what you will. And no, before you ask, it has no magic. This is just pure quality, all the way. I’ll take payment at your pleasure, my lord.”
Brogmin listened to this in mute shock, and then sat in mute silence for several seconds as his face reddened. He was shaking with barely controlled fury as he whispered his angry response through gritted teeth. “And why should I pay such a price, for something that you wholly attest lacks even the slightest trace of magic? This is outrageous!”
“Oh, really,” said Gallen, in his slightly amused way. “Observe, your lordship, if you will.” At this, he slowly drew an adamantine dagger. Then he lifted the sword and its sheath from the box, placing the sheath aside and holding the dagger in his left hand as he grasped the rapier in his right. Then he struck the edges of the two weapons together. The upper half of the dagger fell away, cleanly shorn.
“Triple-refined adamantine is to normal adamantine what hot steel is to butter. Of course, it will not be so effective against enchanted adamantine weapons, but it could still shear through those made of lesser materials such as steel or mithral. And if that wasn’t enough to convince you, the Duke of Weyt offered me four-hundred and fifty. I was sorely tempted, I must say. But alas, a deal is a deal. Of couse, if you lack interest…”
Brogmin’s temper had cooled as a result of this demonstration, but flared again at the mention of his rival’s offer. He barked his reply, at first angrily, and then steadily calmer. “No! No, I will pay your price. High as it is, I will pay it. Bring it to my palace tonight, and I will reimburse you. And thank you for your loyalty in bringing it to me first.” Images of Weyt’s overlord holding a broken mithral rapier and an embarrassed expression began to waft through Brogmin’s mind. He began to smile.
“A pleasure as always, my lord,” said Gallen, as he opened the tent flap and let Lord Brogmin out. “A pleasure…”
 The Basics
Though seldom noticed, the masterwork item is a core of fantasy roleplaying, particularly in the Dungeons and Dragons game, where only masterwork goods are suitable for enchantment, and therefore every magical item is automatically a masterwork. But the concept of the masterwork itself is taken for granted, and as such is treated in a very unrealistic fashion.
According to the standard rules, a masterwork item requires the creator to succeed at a skill check in the relevant skill to make an item, and then a subsequent skill check in the same skill with a predetermined DC of 20 in order for the item to be produced as a masterwork. If these rules are followed, any character with 10 ranks in a Craft skill (which can be achieved as early as 7th level) and average Intelligence can create a masterwork version of any item that they can make, simply by taking 10. And characters with masterwork tools or higher Intelligence scores can create masterworks even sooner.
Is this justifiable?
In short, the answer is yes, and for a very simple reason. In any given campaign world, the vast majority of craftsmen are not going to be adventurers, but simply folk who have settled down to a life in a given industry to produce quality goods for paying customers. There will be few non-adventurers who will ever be skilled enough to create masterwork goods, meaning that the masterwork item will still be seen as an achievement.
So far, the rule is sensible and conforms to a general realism similar to what we see in our own world. But the realism only carries so far, for as any artist or artisan will happily admit, there are masters… and then there are Masters.
In the real world, crafts, arts or professions occasionally manage to produce individuals whose skill has reached such a high degree that their works are unparalleled for excellence. Their mastery is so great that their very name attached to a work is enough to make it priceless. Da Vinci, Van Gogh and Rembrandt are names known to everyone in the Western world, and for good reason; their works were of this standard. And in every case, their mastery was the result of phenomenal trials coupled with an innate talent for their craft and a tremendous will to excel.
In the game world, it is the adventurers that face such trials, that possess such a will to excel, and that have any real chance of developing through effort and magic their innate talent at various crafts. This is reflected in their ability to achieve phenomenal scores in various skills, finally reaching 23 ranks in class skills prior to achieving epic status. With access to appropriate magic items, upper-level adventurers may even be able to achieve Craft skill checks as high as DC 60 (23 ranks, +5 Intelligence bonus, +2 masterwork tools, +20 insight bonus via moment of prescience spell, and taking 10).
Unfortunately, here the standard rules break down. According to them, a masterwork represents the pinnacle of a given craft, and therefore a character cannot produce better than a masterwork. Instead, higher Craft checks merely give characters the ability to make a masterwork faster, since the gold piece value that they can craft in a day is equal to the DC of the Craft check. In the real world, however, more skill doesn’t just lead to faster creation of masterworks, but also to better masterworks.
The purpose of this article is to supply what the standard rules currently lack: a coherent system for creating and valuing such superior masterwork items.
 The Rules
 Degrees of Quality
As already stated above, an item is a masterwork if its creator succeeds at a second Craft check with a DC of 20 during its creation, in addition to the original Craft check to create the item. However, the standard rules declare this as the limits of craftsmanship. So how do we transcend them?
Extrapolating from the standard rules is the first and best place to start, as doing so is not only easiest on both DM and player, but also makes the most sense in terms of game play. To do so, we have to first determine what separates superior masterworks from their lesser cousins. And the answer is simple: quality.
But how do we determine the quality of a masterwork?
If a standard masterwork requires a second Craft check with a DC of 20 to create, superior masterworks are going to require their second checks to be much higher. Ideally, such items should be to masterwork items what masterworks are to standard items; thus, a second-degree masterwork would require a second Craft check with a DC of 40 to create. This is achievable with magical aid by mid-level adventurers, or without such aid by upper-level characters.
Of course, using this simple extrapolation means that we don’t actually have to stop at merely second-degree. A third-degree masterwork is also possible at non-epic levels, provided the character can acquire the appropriate magical aid to meet a second Craft check with a DC of 60 during its creation. And at epic levels, where infinite skill progression is at least theoretically possible, even higher degrees of quality can be produced.
 The Price of Perfection...
Of course, higher-degree masterworks, like everything, have to have their limits. In the real world, there’s no such thing as infinite ascension in anything, especially craftsmanship, and the game world should contain at least this much realism. So where do we draw the line? When is better simply not possible?
The answer comes down to economics. Simply put, creating a higher-degree masterwork is about excelling in craftsmanship, and as such is something that cannot be rushed. It is slow, delicate, tedious work that requires the best raw materials and the most diligent attention to detail. Because of this, it costs a fortune in resources to do… but also produces a product that is correspondingly more valuable.
Because of the labour and resources involved in their creation, higher-order masterworks are astoundingly valuable. Producing a standard masterwork adds 300gp to the market price of a weapon, 150gp to the market price of a suit of armour or shield, 100gp to the market price of a musical instrument and 50gp to the market price of anything else. Creating a second-degree masterwork multiplies this additional value by a factor of 30. Thus, second-degree masterwork weapons add 9,000gp to the weapon’s market price; armour and shields add 4,500gp; musical instruments add 3,000gp; and everything else adds 1,500gp.
This cost increases exponentially, such that the market price of a third-degree masterwork is 900 times that of a standard masterwork, that of a fourth-degree is 2,700 times that of a standard masterwork, and so on.
As usual, characters crafting such superior items must spend ½ their market value in resources to create them, and can complete as many gold pieces worth of work on such items per day as their Craft check result. Thus, their creation is painstakingly slow, growing exponentially more so the finer the item to be produced.
 …And its Benefits.
Of course, with creating such items being such an expensive and time-consuming endeavour, the players’ characters are going to want to know that they’re getting some value for their money. And indeed they are…on multiple fronts.
Firstly, second-degree and higher masterworks are, as stated, extraordinarily valuable, due both to their quality and their rarity. As such, a character that makes or finds them is guaranteed of finding a buyer rapidly, and a maker is likely to find themselves developing a large number of clients and contacts that can help them with more than just gold.
Secondly, higher-degree masterworks are marks of prestige, and are likely to grant bonuses to Diplomacy checks when dealing with the right kinds of people (career soldiers are certain to be impressed by a warrior who wears second-degree masterwork chainmail or carries a second-degree masterwork sword).
Thirdly, higher-degree masterworks are simply better items, providing benefits similar to those of masterworks, but of a higher order. Higher-degree masterwork weapons get better nonmagical bonuses to attacks, armours and shields have reduced armour check penalties, musical instruments improve the Perform check of the player even further, and tools give better bonuses to Craft checks. Higher-degree masterwork gems and jewellery are more beautiful, with finer detail, fewer flaws and perfect shapes.
|Table 1-1: Masterwork Weapon Values and Benefits.|
|1st||+300gp||1st degree- +1 enhancement bonus to attacks.|
|2nd||+9,000gp||2nd degree- +2 enhancement bonus to attacks, +10 hp, +1 threat range.|
|3rd||+270,000gp||3rd degree- +3 enhancement bonus to attacks, +20 hp, +2 threat range.|
|4th||+8,100,000gp||4th degree- +4 enhancement bonus to attacks, +30 hp, +3 threat range.|
|5th||+243,000,000gp||5th degree- +5 enhancement bonus to attacks, +40 hp, +4 threat range.|
The increased threat range stacks with, but is not doubled by, the keen weapon special quality or the Improved Critical feat. Thus, a keen longsword has a threat range of 17-20, while a keen 2nd-degree masterwork longsword has a threat range of 16-20.
|Table 1-2: Masterwork Armour Prices and Benefits.|
|1st||+150 gp||1st degree- armour check penalty reduced by 1.|
|2nd||+4,500 gp||2nd degree- armour check penalty reduced by 2, +10 hp, -5% arcane spell failure chance.|
|3rd||+135,000 gp||3rd degree- armour check penalty reduced by 3, +20 hp, -10% arcane spell failure chance.|
|4th||+4,050,000 gp||4th degree- armour check penalty reduced by 4, +30 hp, -15% arcane spell failure chance.|
|5th||+121,500,000 gp||5th degree- armour check penalty reduced by 5, +40 hp, -20% arcane spell failure chance.|
The lessened armour check penalty stacks with the benefits granted by mithral and other raw materials, and with any class features that lessen arcane spell failure chance.
|Table 1-3: Masterwork Musical Instrument Prices and Benefits.|
|1st||+100 gp||+2 to Perform checks.|
|2nd||+3,000 gp||+4 to Perform checks.|
|3rd||+90,000 gp||+6 to Perform checks.|
|4th||+2,700,000 gp||+8 to Perform checks.|
|5th||+81,000,000 gp||+10 to Perform checks.|
|Table 1-4: Masterwork Tools Prices and Benefits.|
|1st||+50gp||+2 circumstance bonus to Craft checks.|
|2nd||+1,500gp||+4 circumstance bonus to Craft checks.|
|3rd||+45,000gp||+6 circumstance bonus to Craft checks.|
|4th||+1,350,000gp||+8 circumstance bonus to Craft checks.|
|5th||+40,500,000gp||+10 circumstance bonus to Craft checks.|
|Table 1-5: Masterwork Gem Prices and Quality.|
|1st||+50gp||Perfect shape and proportions, flaws minimal and difficult to see with the naked eye.|
|2nd||+1,500gp||High polish, need magnifying glass to see flaws (very small).|
|3rd||+45,000gp||Superior polish, need jeweller’s loupe to see flaws (almost invisible).|
|4th||+1,350,000gp||Exquisite polish; need magic to find flaws (microscopic).|
|5th||+40,500,000gp||Unbelievable polish, totally flawless.|
|Table 1-6: Masterwork Jewellery Prices and Quality.|
|2nd||+1,500gp||Fine and intricate workmanship.|
|3rd||+45,000gp||Fine and intricate workmanship, with great detail of a kind extremely difficult|
|4th||+1,350,000gp||Fine, detailed and intricate workmanship, with detail in seemingly impossible places or of inexplicable quality.|
|5th||+40,500,000gp||As above, but with detail on top of detail, all of inexplicable quality and much of it in seemingly inaccessible places.|
 The Time Factor.
Time is a major factor when crafting higher-degree masterworks, especially those of the fourth and fifth degree; the vast majority of creatures either do not normally live long enough to produce them, or could only produce them by devoting their entire lifetime to the doing, leaving out such things as free time, holidays and their social lives. Does this make them impossible?
If we add nothing further to these rules, then the answer would be yes for all but outsiders, who are naturally immortal and so do not see time as mere mortals do. While there would certainly be enough fanatical craftsmen amongst the outsiders to see some highest-degree masterworks produced, it would be no fun for the players if their characters had to become outsiders in order to follow this path. So how can we reduce this temporal element?
Fortunately, the higher degrees of masterwork items are by their very nature only accessible to epic-level characters, whether they are making or buying them. And an epic feat already exists that, if adapted to simple craftsmanship, could quite easily solve this problem. This feat is the Efficient Item Creation epic feat, and below I have included the adapted version for craftsmanship of nonmagical, higher-degree masterwork goods.
 Efficient Craftsman [Epic]
Choose one Craft skill that you know. You are preternaturally efficient when producing the goods of this craft.
Prerequisites: Any Craft skill 24 ranks; either Skill focus or Epic Skill Focus in the same Craft skill.
Benefits: Choose any one Craft skill that you know. From now on, you can produce a number of gold pieces of work per day equal to your Craft check x 10. You can also take 10 on this Craft skill at all times, regardless of disturbances.
Normal: You cannot take 10 in conditions likely to cause distraction, and you can only craft a number of gold pieces of goods per day equal to your Craft check result.
Special: You can take this feat multiple times. Its effects do not stack. Each time you take it, it must apply to a different Craft skill.
 Option: Better Materials.
As the old saying goes, “the best goods require the best raw materials,” and your players may like their characters to have the further option of working from refined raw materials.
Refined materials are in every way the equivalent of masterwork raw materials (even requiring an appropriate Craft check result in a relevant skill to prepare), and as such can also be refined to higher degrees than simply the first. Such materials gain significant benefits from the refinement process, but like their masterwork item counterparts, they are phenomenally expensive and consequently take a long time to prepare.
The refinement process has few restrictions, although there are some substances that simply cannot be refined. In essence, since the process is about removing traces of undesirable material from the raw material in order to end up with a purer raw material, the process of refinement cannot be applied to any substance that cannot be so culled. Thus, wool, flour and metals of all kinds are open to refinement, but wood, horn and hides are not.
Refining of metals requires the Craft (metallurgy) skill, while refining of most other raw materials can be accomplished by a Craft check in the relevant auxiliary skill (such as weaving for refining of fibres or confectionery for flours and sugars)
The benefits of refining material vary from substance to substance, and depend largely upon the original nature of the substance. Refined metals typically gain an extra 2 points of hardness and 10 hit points per inch of thickness for each step of refinement, while wool and other fibres create softer and lighter clothing and refined flours produce sweeter, smoother baked goods.
In addition, special materials will provide further benefits. Refined mithral armours and shields increase the maximum Dexterity bonus of their wearer by one point per degree of refinement, yet mithral weapons gain no greater benefit from refinement. Adamantine armours increase the damage reduction they bestow upon the wearer by 1/- per degree of refinement. Adamantine weapons increase their ability to penetrate hardness, penetrating any hardness lower than their own (any hardness below 22 for first-degree refined adamantine, hardness 24 for second-degree refined adamantine, and so on).
The refining process is expensive, however, and some products may simply not be worth refining, gaining too small a benefit for the effort and cost required to refine them. Perishable goods such as flours especially suffer this restriction. Market price modifiers for refined raw materials are given below, and these are added to the per pound price of the raw material in question. If the material carries a unit cost per item (as adamantine does) rather than a per pound price, this unit price becomes the per pound price for the refined item, with the refinement cost being added to this as normal.
|Table 1-7: Refined Raw Materials Price Modifiers.|
 The Adamantine Ceiling.
In real terms, even at epic levels and with the noted corrections in this article, it is simply not possible to produce anything beyond a 5th degree masterwork, due to the time and economic constraints of such an activity. So expensive and time-consuming are they, that players may well wonder why they should bother striving for them.
In my campaign, I have provided both the ultimate incentive and the ultimate discouragement for such achievement: ascension to godhood. I rule that any character whose devotion to their craft is so great that they would strive to produce a 5th degree masterwork deserves to become a god of their craft. Further, I rule that such a character has no choice as to whether or not they take up the burden of godhood; their devotion to the act decides their choice.
Of course, it would be an injustice to the players to be completely arbitrary in this, and so as a DM I allow them fair warning; at the commencement of plans to create such an item, I have a divine messenger of an appropriate god deliver the warning. If the player still wishes their character to walk down this road, then the god in question typically becomes their sponsor, setting challenges during the process and providing aid as appropriate for a quest for divinity.
 Why Use These Rules?
As a Dungeon Master, I have found that using these rules has vastly enriched my campaign, as both player and non-player characters now have a reason to possess extraordinarily high Craft skills, and extremely valuable goods can now have their value more easily explained, not by virtue of their size or magical powers, but by virtue of sheer craftsmanship.
My players have also enjoyed it, and one has even used her immaculate longbows to gain her a place in a royal court as bowyer and fletcher to the King! From their perspective, it gives them something to hunt for other than magic, and allows non-magical classes their own special way to produce items of power.
It has also allowed my campaign to have a more integral history, complete with famous craftsmen and artists, and it has given the players something other to quest for than the usual run-of-the-mill mound of gold, bag of jewels or fancy staff. And that has made gaming more fun for us all.
 Last notes and Ideas from the forum post
These are choice snippets from the original forum post, designed to aid players who want a bit of variation on this Variant rule. Some of these posts ARE NOT from the original author, and are not the canon variant rules as above.
 From BluePointSorceror
Updates for Better Masterworks
When I first wrote this article, I was putting ideas out there for people to play with, ways to enrich your campaign through having better versions of treasures than just simple masterworks and enchanted goodies. A lot of people have taken issue with what I wrote, complaining about this or that facet of it.
Finally, I've succeeded in getting people to think outside of the square, to ask questions about why their treasures are worth what they are, and about how they can quantify quality of treasures to give them more gaming flavor.
Now, a lot of you out there had issue with the way I priced the various degrees of superior masterworks, saying that the 30-fold price increases were way too steep. If you think so, and you wish to use a 10-fold price progression, then more power to you. But before you do, let me spell out the reasons why I chose this price progression.
At 10-fold progressions, a 2nd-degree masterwork weapon is only going to cost an extra 3,000 gp. It has taken its crafter probably most of their lives to become skilled enough to make such an item, and yet, any character of 5th level or above is likely be wealthy enough to purchase it without too much issue. Following in this vein, just about every senior adventurer could be expected to be positively dripping with 2nd- or 3rd-degree masterworks of this or that, provided they can find enough crafters to make all of these superior items (highly unlikely).
At 30-fold progressions, however, a 7th-8th level character will still find the price of a 2nd-degree masterwork to be steep, and that of a 3rd-degree to be exorbitant. This is as it should be; these items are meant to cost the earth, because they are extremely rare and valuable due to the very limited number of craftsmen who can produce them.
And as to complaints at a sword worth 283 million gold pieces, why not? After all, how much would you pay for the personal sword of the God of Swordsmiths, stolen from his very side (since that's about the only place you'd be likely to find such a weapon!)? And 4th-degree weapons are extraordinarily rare items, found only in epic realms and rarely sold only for cash. Does your player want such a weapon, but hasn't got the millions? Then think of something that its maker (or current owner) would want more than a huge mound of cash...
Secondly, there were fears that the benefits of such items were too minor to justify the expense of them, and in some ways I have concurred with this opinion. But for the most part, this complaint comes from a lack of imagination on the part of the complainant. Let's face it, how strong an adventure hook is a 3rd-degree masterwork item? from finding it, purchasing (or pilfering) it, enchanting it through to keeping it from being pilfered or taken through conquest, it's an adventuring hook designed to keep both DMs and players busy for a very long time indeed.
However, some of this complaint was justified. Superior masterworks are, after all, better-quality items, and should reflect this more strongly than they did in the original article. For this reason, I have included the following simple patches to make such items truly superior:
1. Increase the hit points of any superior masterwork item by 10 hit points per degree of masterwork above the first. Such items are no harder than their normal counterparts, but they are tougher and therefore likely to survive more brutal punishment.
2. Decrease the arcane spell failure chance of superior masterwork armours by 5% for every degree of masterwork beyond the first. These armours are so comfortable and provide such ease of movement that they are much less likely to interfere with the somatic gestures required by many arcane spells.
3. Superior masterwork weapons are better-built, so in addition to the hit-point patch described above and the non-magical enhancement bonus to attacks described in the original article, increase the threat range of such weapons by one point for each degree of masterwork beyond the first. This should stack with (but not be doubled by) the threat range increase of the keen special quality or the Improved Critical feat.
Thus, a rapier has a threat range of 18-20, a 2nd-degree masterwork rapier has a threat range of 17-20. If these were enchanted with the keen quality or wielded by someone with the Improved Critical (rapier) feat, the rapier would have a threat range of 15-20, while the 2nd-degree masterwork rapier would have a threat range of 14-20.
Following this rule, you will find that these weapons will be prized above plain-old magical weapons despite their hefty cost, as they are more likely to survive damage and more deadly when wielded than their more common magical counterparts.
4. The market cost of enchanted superior masterwork items remains the same, as these properties are in every way identical. However, the cost of enchanting such superior masterworks may be lessened, at the DM's discretion. I personally suggest reducing the cost of adding an enchantment to an item by 10% for every degree of masterwork beyond the first. Since enchanting an item costs half its market cost plus 1/25th of market price in XP, this would reduce costs according to this scale:-
|Table 1A-1: Refined Raw Materials Price Modifiers.|
|2nd-degree masterwork:||45% of market price and 90% of usual XP requirement.|
|3rd-degree masterwork:||40% of market price and 80% of usual XP requirement.|
|4th-degree masterwork:||35% of market Price and 70% of usual XP requirement.|
|5th-degree masterwork:||30% of market price and 60% of usual XP requirement.|
I hope these patches give you all out there some ideas of better ways to add superior masterworks to your games; after all, I've been playing them in my games, and they've been an abundant source of adventure hooks, creative characterization and DM humor from the start. After all, what do you think your player's reaction might be, if that rare and ultra-fine sword of his was stolen? Chuckle, chuckle, chuckle....
 From Xavon_Wrentaile
My 2 silver pieces:
1) I agree that magic and mundane bonus should not stack. However, if you disagree, turn it to your advantage. A non-epic magic weapon/armor is limited to 10 'pluses'. If you want the magical +5 to hit or AC, that's half of your allotment right there. With these superior masterwork items, you can put the minimum +1 enhancement, and use the other +9 for other effects.
And, of course, as mentioned before, you have less to fear from anti-magic and the like.
2) When I use this in my campaign, I will not do straight pluses to hit. Instead, I would use the creator the ability to choose from a set of bonuses to give the weapon or armor, at the rate of one bonus per level of masterwork.
|Table 2-1: Weapon Bonuses:|
|+1 to hit (no limit)|
|Increase damage die (1d6 becomes 1d8, etc. limit 1)|
|+1 to critical threat range (limit 1)|
|+1 to confirm critical, and +1 damage on critical hit (limit 2)|
|+2 Hardness and +10 HP (no limit)|
|+1 to AC (limit 1)|
|Table 2-2: Armor Bonuses:|
|+1 to AC (no limit|
|+5 to max speed and -10% weight (does not increase wearer's speed, no limit)|
|-5% chance of arcane spell failure (limit 2)|
|+1 Max Dex bonus, and -1 Skill Check penalty (limit 2)|
|+2 Hardness and +10 HP (no limit)|
|DR 1/- (heavy armor only, limit 2)|
That way the crafter can personalize their creation, and the DM an vary masterwork treasure.
 From Draegun Fury
Although I am an avid supporter of superior Masterwork Items, I am not so sure about this system. This is not to say that there is anything inherently wrong with this system, yet rather that D20 has presented another system already in which I find to be pleasing.
The sheer cost of this system is outstandingly harsh. In keeping with your article, I will point to real life whilst trying to explain why this is insanely off. The DMG tells us that a common laborer earns 1sp per day of work. That amounts to about $50 US (The 1sp is barely enough to permit survival for the worker and a small family. $50 US reflects this in my eyes). This makes 1gp roughly the equivalent of $500 US.
Assuming these exchange rates are roughly accurate, then a Greatsword would cost about $25,000 US, rather steep, but what I imagine would be fairly accurate. (Note a good quality sword these days costs about $1,000 US, considering that in Medieval Europe access to ores and the increased difficulty in crafting, I think a Multiplyer of 25 to be reasonable.)
Now if a Greatsword: 50gp = $25,000 Then a Masterwork Greatsword: 350gp = $175,000 (Now we can see why it is called a "Masterwork" sword, and we should have a new outlook about them when it comes to roleplaying, compare a normal family car to an expensive sports car.)
If we keep your pricing then...
a 2nd-Degree masterwork Greatsword would cost $4,525,000
a 3rd-Degree masterwork Greatsword would cost $135,025,000
a 4th-Degree masterwork Greatsword would cost $4,050,025,000
and a 5th-Degree masterwork Greatsword costs $121,500,025,000!!!
I just can't see anyone ever paying this much for a Sword. The U.S. President of today is the equivalent of a Medieval Emperor, and even George W. couldn't afford most of these swords. And Bill Gates wanted to purchase a sword of this quality he would probably have to sell a large chunk of Microsoft.
I mentioned that d20 already provides a system along similar lines, (you'll find it in Star Wars RPG) it is called the Mastercraft System. The way it works is simple, adding a +1 to any quality of an Item doubles said Item's cost. So a mastercraft Greatsword with a +1 to hit would cost 100gp. Adding a further +1 to hit or a +1 to damage would raise the price to 200gp. The total + that an item can have to any one quality of an item is 3.
A fully developed mastercraft Greatsword (the best possible greatsword) would have +3 to hit, +3 to damage, +3 to hardness, and maybe +3 hps?, such an Item would cost 204,800gp or in modern day currency, $102,400,000. (Pretty steep but you could see some collectors paying as much.)
If you do NOT believe this is expensive enough, trying keeping the masterwork quality as the first mastercraft. So a mastercrafter can add +1 to hit on a greatsword, but this first +1 costs +300gp, then the next +1 would double the first cost. Doing this would make the final cost of a "+12" greatsword 716,800gp or $358,400,000.
Anyway just an alternative, as I said I am an avid supporter of superior masterwork Items, but I find the appeal of the d20 mastercraft system a more attractive option than forking out 243 million gold for a mere +5 to hit.
The cost to add the masterwork property is 300 gold pieces. The cost to add +1 magical enhancement is 2000 gold pieces. The first is 15% of the latter, so would not this same progression apply to subsequent higher quality mundane items? +2 non-magical enhancement would be 1200, +3 would be 2700, and so on. There is the obvious factor of the 1/25 XP cost to craft magic items which is not present in crafting these masterwork items. A simple way to handle it would be to add this cost. This would mean no 1st-level character could create a [+1] masterwork item, but a 2nd-level character certainly could pay the minimal 12 XP required, or even the 108 XP to add the +3 masterwork property.
The system could continue up to +10 as the magic system, not allowing more than a +5 attack bonus as the magic system only allows a +5 enhancement bonus to damage and attack rolls, but the additional +5 being for other banal means of addition (such as diamond edging for an increased critical threat range).
There is also the problem of craft DC's. Personally I consider a DC 40 check to create a +2 masterwork item too steep. Just as a +10 effective bonus magic sword is possible pre-epic, so should be a similar non-magic version.
I understand the uniqueness that you were striving for in stepping away from magical crafting... but it seems to me that it is easier and more balanced to base it off of the existing way to enhance items.
Magic items have gold costs; masterwork items have gold costs. Magic items have XP costs; masterwork items on the system given above have XP costs. Magic items need certains spells and feats to be created; masterwork items need craft DC's. Magic weapons work against damage reduction/magic; masterwork weapons/items are effective even in an antimagic field. As long as one keeps the system consistent, the two will remain balanced against one another.
In that, one could base the craft DC's on required caster level to create magic items with enhancement bonuses; the base DC to craft a [+1] masterwork item is 20, for anything above that, a craft DC equal to three times the effective non-magical enhancement + 20 is needed to create the item. The DC to craft a sword with an effective +2 non-magical enhancement bonus would then be DC 26, +3 a DC 29, +4 a DC 32- all the way to +10 at a DC 50, difficult but manageable.
Keep in mind that this is only suggestion; however, I find it illogical to create an entirely new system when an existent one with some tweaking would serve the purpose.
 Further Notes
Excellent system, really like how it gives quality workmanship its rightful place in D&D again! I have a few tweaks for it, though:
For the weapons, since Magic and Non-Magic enhancements do not stack, what incentive would there be for a PC (non-roleplay-wise, of course) to go after this instead of the usual +X weapon? There, they get enhancements to both attack AND damage, and set themselves up for additional effects down the road (Bane, Burst, Keen, etc), all for a significantly lower cost, so no player would ever actually set out to purchase/aquire these items on their own, and they probably won't appropriately covet them over their more-prolific-yet-magical bretheren.
Under your system, I would propose that the +2-+5 weapons would have an additional "Inherent" bonus to attack, to have something to stack on top of magic effects. The non-magic enhancement bonuses will, of course, remain in case anti-magic fields are used (it IS a good quality weapon, after all!). So your 3nd-tear masterwork sword would now have a +3 non-magic enhancement bonus to attack, 20 additional hitpoints, a +3 to the crit-range, and a +2 non-magic inherent bonus for attacks, and a 4th-tier sword would have a +4 non-magic attach, 30 hitpoints, +4 to crit-range, and a +3 inherent attack. This way, players feel they're getting something for their money when they can finally have that "+9 Keen Greatsword of I-Kill-Everything", and will definitely treasure any of these items that they find! And it would stack with every known magic Inherent bonus out there, too. Why? Because all other Ineherent bonuses apply to the characters, not the items they're holding.
In fact, I might go further by adding a non-magic +1 Inherent bonus to damage for every +2 Inherent bonus to attack. So the 3rd-tier above would also have a +1 inherent bonus to damage (as would a 2nd-tier), and a 4th-5th tier would have a +2 inherent bonus. So a +5 5th-tier MW weapon (something carried by gods anyway) would be a fearesome weapon indeed...and one highly saught by any who posess the skill and motivation to wield it!
For the Refined Materials bit, I would expand it with the following: Any monsters with DR X/material that are struck by weapons/items made of that material (an example being Cold Iron) take 2 additional points of damage for every degree of refinement, in addition to bypassing that damage reduction. Armor that was made from refined materials automatically deals similiar damage per refinement degree to any creature that uses natural/unarmed attacks and strikes the wearer, automatically bypassing any damage reduction of the material's type (so a Fey creature that punch's someone wearing a 2nd-tier Cold Iron Breastplate takes 4 points of damage automatically). Creatures with more then one type of DR (Devils/Demons, for example) still take the damage, but said damage is absorbed by their other DR(s) normally. Armor work's similiarly, but the damage absorbed temporarily lowers the creature's other DR until that creature's next turn (so a creature with DR 10/cold iron and DR 10/good is safe from a 4th-tier Cold Iron sword (8 points isn't enough to overcome DR 10/good), but should the creature punch someone wearing 4th-tier Cold Iron armor, the 8 points of damage the armor does would reduce their DR 10/good to DR 2/good until their next turn. Thus, the previous character carrying a 4th-tier CI sword would then be able to get past the temporarily lowered DR and swing for 6 points of additional damage each hit).
For DMs who are worried about balancing issues, just remember that any item the PCs can get, so can the DM...and a monster who has one or more abillities nerfed would probably have enough resources/instincts and motivation to get allies and/or some other form of protection, if needed (Adamantine Axes of Armor Sundering, anyone...?).