Well, we've suggested that the Day, at least, is honeycombed all the way to the bottom, where people live in villages constructed as elaborate scaffolds and one missed step can result in a fatal fall - it does seem, with that in mind, that at least some of the rocks just plain defy gravity, no explanation given. Maybe it varies from island to island - on some, you just fall off and fall downwards, on others, the island does pull from all directions equally and it's possible to find oneself in orbit.
Don't drink the holy-water; we don't like it when you drink the holy-water.
The church naturally thinks this is a walking hog, and tell that the inebriate in his intoxicated glory did see fit to suspend the islands via an intangible framework in his junk room.
Have you guys seen the "dark matter skeleton" to the universe? (I don't mean seen in person - have you heard about the astronomical findings that suggest... you know what I mean.) Dark matter, which interacts with normal matter only through gravity, appears to have formed first - making patterns that the normal matter of stars, planets, and nebulae formed "around."
I kind of picture something similar with Nifflas - like, if some mad cartographer was somehow able to chart the position of all the islands above a certain size, it would draw out some sort of complex connect-the-dots fractal design, a web of gravitic attraction spreading out from the center of the Day.
Yeah, I know that's a bit complex.
The mill should produce grain based on the value of the body. Who were they? What did they do?
A beggar may give only a few grams, a great king may provide grain enough for armies.
If there was a famine, wouldn't people be scrabbling at the gates of powerful folks' abodes? Dragging the king out to be turned into bread?
I'm pretty sure that Nifflas is a place powered by conflict etc. Books can only be written about inventions, magic, and stories. And stories are always about grand adventures. Without new stories, the mental economy dries up and people become hollow men. (Or whatever happens with a lack of books).
And similarly, without conflict there is no one to turn into bread. This is another problem.
I can imagine a huge society devoted to continuing conflict on the islands.
Spells that use fire, acid, or disintegration might be outlawed, because they run a risk of not having bodies to recover. Given the claustrophobic construction of Nifflas, fire magic might be especially frowned upon.
Some spells like Erase would be outlawed too, for obvious reasons in a society dominated by librarians. Memory erasing spells might be heavily punished, while memory stealing spells could be serious business (why hear the story when you can take it before it's sold?).
That's a really cool idea - the only question is how to implement it without punishing spellcasters for choosing effective spells. (Fortunately, most straight-up blaster spells for wizards suck in 4e...) One of the things that's always bugged me about Spelljammer (which is my other favorite setting - in fact, the party in my current campaign will be Spelljamming to Nifflas in a few levels) was that the ships required arcane casters to spend spell slots to power them; which was a perfect mechanic in terms of the feel and flavor of the setting, but it forced the party wizard to use up several of his spells just to get to the site of the new adventure, thus making him less effective in the actual conflict.
Considering that the nature of Nifflas encourages people to be fanatical pack-rats, I don't think we'd need a mechanical reason to remind people that EVERYTHING is treasure, even enemy corpses.
Here's a random idea for the corpse-mill - what if, the more interesting your life was, the less flour the mill grinds you into? What if what the mill processes into flour is your unused potential?