Hi, Sykid. It's a balancing act, because we don't want to do lore and mechanics dumps on the world this far ahead of the game being finished, but here are some things to help with both items and characters:
* Please, if it's at all possible, consider making something that is not a sword. I think we say this in the survey, but I'd like to repeat it here. There are no junk weapon types in Pillars of Eternity. Even daggers and clubs are good weapons. The same applies to armor and shields. Every type has trade-offs, so if you want to make a suit of awesome padded armor, someone will wear it.
* Many D&Dish effects can go on weapons, armor, and shields. That said, there are also many abilities that are unique to PoE and we will suggest them if the idea of your item seems to fit. At a basic level, all weapons and armor can have a quality modifier of Fine, Exceptional, and Superior that roughly correlate to +1, +2, and +3 (not quite, but close enough). This game is equivalent to a low- to mid-level D&D campaign, so Sun Blades and +5s are too macho.
* Materials like drake/dragon bone can be used in items, but whatever material you specify, try to make it fit with the idea of the weapon. A dragon bone club, spear, or stiletto is more fitting than a dragon bone battle axe or mace. Mithril and adamantine are not materials in PoE. Steel is overwhelmingly used for most metal weapons and armor, with five grades of interest: Wyflan (good steel), March (great steel, more damage, protects better), Ymyran (great steel that is "blackened", faster/lighter), Durgan (super steel from the lost forges of Durgan's Battery) and Skein (like Durgan steel, but very new technology, made with really horrible soul magic).
* Copper and living adra (an abalone shell-like material) are often used to bind souls and magical energy into items.
* The timeline of the civilized world is not "Realmsian". The Dyrwood and the Vailian Republics have only been colonized for a few centuries. The Glanfathans have lived in Eir Glanfath for two millennia. Before them, it was occupied by a relatively unknown civilization known as the Engwithans (who built most of the monuments and holy sites that the Glanfathans now guard). The Aedyr Empire is about 600 years old (well, Aedyr as a nation is that old). Old Valia as an empire was about 1500 years old but has collapsed by the current day. The main point is that more than 4,000 years ago, civilization was extremely modest, not advanced.
* Any NPCs you make could be from the following local/directly involved places...
- The Dyrwood - Focus of the game, colonial area full of once-Aedyran humans and elves. Hardworking, surly pioneers in the country, animancers in the city. More-or-less blew up a god in the Saint's War which (in the new timeline) happened about 10-15 years ago. Dyrwoodan virtues: independence, perseverance, sacrifice, communal hospitality, and vigilantism/feuding. Dyrwoodan vices: servility, shirking (responsibilities), selfishness, lingering (near Engwithan ruins), "facepainting" (pejorative term for sympathizing with/acting like a Glanfathan).
- Eir Glanfath - Deeper forest to the east of the Dyrwood. Once in conflict with the Dyrwood, now (mostly) at peace. Less tech advanced, more communal. Protect the Engwithan ruins. Orlans, elves, some dwarves. Glanfathan virtues: cleverness, subterfuge, frugality, communality, mathematic aptitude. Glanfathan vices: selfishness, cowardice, vanity, social intoxication, token gestures (as opposed to meaningful action).
- Vailian Republics - The most successful offshoot of Old Valia, these colonies sit to the southeast of the Dyrwood and south of Eir Glanfath, past a mountain range. They are a group of allied city states who mostly wield economic power. Mostly humans and dwarves. Vailian virtues: success, shrewdness, restraint, wit, polymathism. Vailian vices: failure, bad style (i.e. doing something not in the "Vailian way"), bluntness, dullness, mercilessness.
- Aedyr Empire - The source of the colonists who settled the Dyrwood and Readceras. Lost both to revolutions, though the Dyrwoodan revolution was far bloodier than the Readceran one that followed. Much younger than Old Valia, but still in existence, which is worth something. Overwhelmingly human and elven. Aedyran virtues: duty, efficiency, loyalty, modesty (not of dress, but of character), purity. Aedyran vices: inconstancy, sloth, sloppiness, impunctuality, mixing work/leisure.
- Penitential Regency of Readceras - Quasi-theocratic state ruled by priests for their patron, St. Waidwen, and their god, Eothas, both of whom seem to have disappeared at the end of the Saint's War (which they started and the Dyrwood ended). The prevailing attitude is that they failed Eothas and Waidwen and must do penance to regain their favor. Readceran virtues: optimism, faith, propriety (proper behavior for your age, sex, and social class), vigilance, discipline. Readceran vices: pessimism, doubt, deviance, rebelliousness, aimlessness.
... or these remote regions, which are relatively far away:
- Deadfire Archipelago - Quite a ways south of the Dyrwood, a wide archipelago of small volcanic island nations. Naasitaq, home of many boreal dwarves and aumaua, is the biggest and most stable nation around. Various nations and empires fight over the islands, to the east of which are sea monsters that invariably annihilate any ships that attempt to go exploring (many of them dwarven).
- Ixamitl Plains - Northeast of Eir Glanfath, the Ixamitl Plains are large expanses of fertile savannas. Mostly occupied by humans and orlans, though the orlans have a bad history with the humans. The Ixamitl culture is one of the oldest continuous cultures in the world, going back a little earlier than Old Vailia. However, they are the least imperalistic large nation around, having only expanded their borders slightly in centuries. Among other things, they are known for their contributions to philosophy.
- The Living Lands - A frontier island area in the far north, a land of wild weather, strange beasts, and hundreds of difficult to reach valleys containing oddities never before seen (according to the people who find them) by mortals. It's a lawless land where communities band together, fall apart, and fight petty wars with each other constantly. Has a reputation for breeding oddballs and madmen. The racial mix in the area is extremely diverse but not necessarily harmonious. Dwarves, propelled by their desire to explore, are very common here, even among the mix.
- Old Vailia - Once the crown jewel of the southern seas, the crumbling island nations of Old Vailia sit thousands of miles to the southwest of their offshoot, the Vailian Republics. Humans and dwarves are common. They are renowned for their great culture and history of accomplishments, though the rest of the world considers them to be far past their prime. The nations that once made up the empire are engaged in a continuous war for dominance that has been going on (and off, and on again) for over two hundred years.
- Rauatai Gulf - Dominated by the aumaua of Rauatai, the gulf to the north of Ixamitl Plains is the trade center for several nations of aumaua, orlans, and dwarves. The land is rich with resources, but hotly contested. And in all matters, Rauatai and its powerful navy almost always gain the upper hand. The whole region is also relentlessly pummeled by storms for half the year.
- The White that Wends - A huge southern expanse of polar ice occupied only by pale elves, some boreal dwarves, and a few really brave individuals from other lands. It is considered mythic -- or at least inhospitable -- by most people from "civilized" areas. Virtually no plant life grows in the White, but somehow its residents manage to survive from year to year.
Class combat foci:
Barbarians have great group-fighting abilities (both melee offense and personal defense).
Chanters have cycling lists of low power, high AoE passive buffs and debuffs and they can periodically use invocations, which are pretty powerful spells.
Ciphers are offensively-oriented psionicists/soulknives (more or less) who build Focus (their resource) through conventional weapon attacks.
Druids are crowd control kings and their beast modes give them nice single-target strikes + various special powers.
Fighters can withstand a freight train, hold a line against charging enemies (are "sticky"), knock down enemies, passively regenerate Stamina in combat, and have reliable attacks + weapon specialization.
Monks convert temporary damage-over-time stacks (Wounds, their resource) into magical abilities. They are melee-focused but have a pretty wide variety of single-target and group attacks. They can use their bare hands (which get more powerful as they level) but can use most of their powers with standard melee weapons.
Paladins have modal auras, powerful single-target support abilities, high defenses, and a Smite analogue in Flames of Devotion.
Priests have better support abilities, worse defenses, and some crowd control abilities that paladins completely lack. Also a few single-target strike spells.
Rangers and rogues both lack crowd control capabilities, but rangers have the edge defensively due to range and the interference their animal companions can run. Animal companions share Stamina and Health with the ranger, but they are very durable, DT-wise.
Rogues have the highest single-hit damage potential and they have a lot of ways to qualify for Sneak Attacks. There are no creature type restrictions on Sneak Attack and it's automatically triggered by a lot of different conditions on the target. Additionally, rogues gain more and more ways to cause those conditions!
Wizards can learn a huge array of spells with a variety of effects, mostly focused on group offense, single-target strikes, and personal defense. They cast directly from grimoires that hold a limited number of their total spells.
Let me know if you have any more questions.