Slightly off-tangent, but has anyone experimented with having a substandard category (opposite of masterwork) for weapons/armor. i mean, you'd expect at least some goblins/similar creatures to have ill-kept/made weapons and armor, yes?
Yep. I'll do "cheap" weapons that do -1 damage.
Also I'm running my PF game in Eberron and there the magic item creation is a near monopoly by the Dragonmarked Houses. To put a mechanical touch on why they have that monopoly I have a house rule that says that any magic item or service not done by a House has a percentage chance (30-50%) of having a flaw, like a CLW potion does 1d8-1 healing.
The Houses have figured out quality control and mass production (their goods cost less too), which is why they have the monopoly.