If the character is willing to spend 2,000 gold on poison for a single attack (I'd guess the poison is transfered to the target when stabbed), why not allow it? He could buy 8 20-ounces powder keg at 250 gp each (ranking as Small Items) and do the same trick (adding a torch and telling all these items to gather around the target). By RAW, it would be 8 explosions (potentially reaching more targets) at 7d6 each, easy save for half. Even if only a fourth of the saves miss, it's 35d6 of damage. I'd rule "and a collapsed building"...