Well, Sean K. Reynolds just explained this to me quite nicely, and the first solid explanation of how this works I might add.
1) Items you create are half cost to your wealth, and you do in fact use Table 5-1 on page 145 of the DMG to establish baselines for character wealth. It's a rough guideline, but fairly accurate. Therefore, if you make the item, it counts against your wealth at half value.
2) If you make an item and give it to someone, it counts against the other person's wealth at full market value.
So, this finally makes sense to me. I didn't mean to seem so thick headed, but quite frankly, nobody here on this entire site has been able to give me a complete explanation. Everyone here seems to sort of know how these rules work, but not why. However, many people here are still way off on the purpose of the character wealth limits. Now that I understand how this works, I have one suggestion. Use that table.
The thing that finally cleared this up was that Sean gave a clear cut example of two different casters. The first cleric purchased all of his items, while the second cleric made a couple of potions for herself. He illustrated quite clearly that because she spent the XP for the items, her casting ability was more limited. The two clerics still balanced out in the end because the second cleric had more items (the potions). You can find that example in the first link.
Here are the two posts from Sean that cleared it up for me...
Thread 1
Thread 2
Thanks to everyone that participated.
P.S. The part that shocks me is that a couple of the rules gurus avoided this thread like the plague. Makes me wonder how few people actually know how and why these rules work the way they do.
