ChrisHaines, maybe you should check out the item creation rules in the Artificer's Handbook, by Mystic Eye Games. It's a formula-based item creation system, that has options for creation that don't include XP expenditure.
I have always liked the XP system in D&D. It emphasizes rewarding the kill which is good because ALL players are bloodthirsty anyway and the game can often bog down if I try to emphasis too much roleplaying, so I prefer to have some combat in a session without it being too gratuitous. This nonsense about "overcoming challenges" is just that - nonsense. As if anyone really bothers crafting "challenges" throughout the length of a campaign as opposed to just throwing PC's into a few good, fun combats with maybe a few puzzles, traps, or the odd non-combat obstacle. D&D, while being a roleplaying game, is definitely combat oriented as befits its heroic fantasy genre.
Of course, not all PC's advance at the same time and that sure works for us. It would seem rather silly to actually ALWAYS have the same PC's all at the same level throughout the length of the campaign. PC's eventually undertake much different activities later in a campaign as individual characters develop more personal goals and that naturally results in different XP rewards and totals for everyone. Besides, the idea that classes are actually BALANCED and EQUAL is silly on the face of it (and always has been) so it's only sensible that characters with fewer levels in a campaign might want to continue to adventure to increase their basic abilities while other characters will actually concentrate on more character-driven aspects of the campaign rather than mindless, video-game dungeoncrawling.
One of the great advantages to accepting the XP system rather than trying to eliminate or severely alter it is that it CREATES no problems (like raising levels, making magic items, and spells with XP costs) when trying to fix what isn't actually broken.