I don’t know… I like the specific effects for material combos, and the variance it gives weapons/wearables etc. It also would lend itself to relatively easy implementation.
However, the “material quality” used in this way seems arbitrary. I rather like @Havok40k’s [idea of recipe effects][1] instead, though I think material quality may also add a nice flavour if used differently.
I also think a skill system is more beneficial to fighting: damage, agility, power. The weapon may give certain attributes: flame damage, sharpness, life steal, but again I think it arbitrary to put the increased damage in the weapon. “the most effective weapon is the hand” (that wields it). Even Excalibur in the hands of a child is just a long sharp knife; but in the hands of a trained warrior…
I think it is a mistake to invest so much of the “fight” in the weapon rather than the character.
Though I haven’t thought through how any of this would fit in with “End Game”… Not even certain how “end-game” fits into an open-world MMO.
EDIT: Figured out how to add a link to Havok’s post for reference.
[1]: Sandbox Crafting Concept