The Forge is delicate. You can only make 2 items and they have to be made back to back without mucking about with the levers and switches too much.
The real bug is with the save games and environments. If you break the forge it apparently becomes broken for all your saves going backwards.
The same bug exists if you detonate the Runepowder when talking to the Gnome. You cannot jump to before the save as the environmental damage cannot be undone.
