In the game Evil Islands, equipment and spells could be custom made, similar to your suggestion. For equipment you need a blueprint and material (some of which you collect from defeated opponents), and you can deconstruct existing non-unique items and reform them with different spells or better material. Spells start with the basic magic type, and you can add runes to increase the effect / duration / range or decrease the mana requirements. Each rune has a certain complexity that adds to the base spell value, and the characters' stats/skills determine how complex a spell they can use, while the type of equipment and material used determines what spells can be placed in equipment.
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