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When planning a campaign, I recommend that DMs write a few paragraphs to answer these questions:

How are magic items created?
Who makes magic items?
What resources are needed to make magic items?
How common are magic items?
Can you buy magic items?
How valuable are magic items?

I think answers are campaign-dependent. As a DM, I answer these six questions for each campaign I run and provide a summary to the players before they create their characters. This provides background information they need to create their characters (they need to know other things too--things about the setting).

Here are three possibilities:

Low magic: Magic items are very rare. No living people know how to make them. Most people will never see a magic item. There are stories of ancient items that have been lost, or are rumored to be the property of certain powerful individuals. Magic items are likely very durable and long-lasting, which explains how they have lasted this long.

Medium magic: (default perhaps) Magic items are uncommon. Powerful or wealthy people may have one or two prized items. Those who create items may guard their secrets to keep the power out of enemy hands. Under the right conditions, player characters may be able to learn how to create magic items. Only under rare circumstances would someone willingly part with a magic item.

High magic: Magic items are everywhere. They are easy to create and many people know how to make magic items. Large towns have magic items for sale in various shops. Buyer beware--not all magic items work as advertised. It's often better to make your own. Some Wizards specialize in making or using magic items. Finally, magic items are often as easy to break as non-magical items. 

Footnote Regarding XP Cost

I'm not a fan of XP cost. It seems that XP cost is too much of a disincentive for a character to create a magic item. However, if this is the only way to attain the desired balance then I might employ it.

I would like to offer a statement for consideration. It makes several broad assumptions, but may offer (with your help) enough language and logic to "prove" the importance of our discussion here on these forums. The terms defined and concepts described may be helpful to those writing critiques.

A work is a piece of art, literature, game, tool, or other artifact.

A lens is a framework of theory, and is often employed to systematically examine a work. Lenses include but are not limited to academic disciplines such as history, anthropology, materials science, political studies, philosophy, and equality studies (to use the new British English term I learned here). Not all lenses are academic disciplines. Other lenses may be defined as necessary.

Culture (or cultural context) is a collection of values, norms, lenses, works, and shared experiences. Culture is one mechanism through which we are able to evolve and adapt in a short period of time.

Claim 1: The works created in a particular cultural context are related to that cultural context.

A critique is an examination of a work. A critique is also a work. Critiques often employ one or more lenses. The writer of a critique may or may not explicitly name the lenses employed in the critique.

Claim 2: A critique of a work, being itself a work, may tell us more about the culture in which the critique was made and the lenses employed by the creator of the critique than about the object of the critique or the culture in which the object was made.

A review is an immediate critique of a work. Together, the work and the review can tell us a lot about a particular cultural context, as the review was made within the same or similar cultural context as the work.

Claim 3: Our critiques of earlier works, although not flawed, reflect more about our culture today, than about the culture in which the objects were made.

Claim 4: DDN and the reviews of DDN shall together reflect the culture of today. This is not to say that whatever happens, happens. Rather this is to say that DDN shall be judged by how well it fits the needs of today's culture.

Claim 5: By sharing our well-considered critiques here, we provide WoC information that  may used to increase the likelihood that the work, DDN, is positively reviewed. Additionally, by doing so, we increase the likelihood that DDN will be successful.

I am not denying that there may be some need for some primal "evil" and "good" forces in our fantasy genre. In some cases, an "evil" demon may make a good plot device. However, such evil could be described in other ways--no regard for life, likes to cause others pain, selfish, etc.

Now I'll list my reasons for not loving the alignment systems in D&D.

1. Confusing: Confusing for new players. Alignment is not an intuitive model for describing character, personality, motives, or loyalty.

2. Arguments: Creates unwanted opportunities for arguments/debates, especially out-of-character arguments. This halts actual play.

3. Low utility: Not especially helpful to fleshing out a rich tapestry of characters, setting, or story.

4. Game exploits: Game exploits turn alignment into just another min/max advantage via detect evil, protection from evil, smite evil, kill evil, and justification for doing so. As others on this thread have said, these kinds of spells can make many complex plots/problems, that would otherwise be interesting to play out, boil down to detect evil--kill evil.

5. Alternatives: There are many other ways to flesh out characters that are more compelling. Character history, personality traits, phobias/fears, likes/dislikes, loyalties, allegiances, greed, etc.

6. Reinforces racism: Assigning an alignment normative range (or behavioral norms) to a particular race in our fantasy genre reinforces racism in the real world. V a n D y k e wrote an excellent blog that touches on this point here: raceindnd.wordpress.com/ (look for his Nov. 18 piece half-way down the page)

7. Evil: "Evil" is a hot-button button issue for D&D "haters". Sure, other things are too.

I have drafted a proposed skill framework for your consideration for the next D&D release:

I. Calculating Skill Scores 

Buying skill bonuses:
Each Skill Bonus costs twice as much in skill points.
       
Skill Points   Bonus        
 1/2          +0*        
   1           +1
   2           +2 
   4           +3 
   8           +4
 16           +5
 32           +6

*1/2 skill point allows a character to have the feature "trained" in a skill.

Calculating skill scores:
Each skill is keyed to one or two attributes. If a skill is keyed to one attribute, the skill level is calculated by adding the attribute value (not the attribute bonus) to the Skill Bonus given in the table above. For example, let's assume that Slight of Hand is keyed to DEX. If a character has 14 DEX and invests 8 skill points in Slight of Hand (refer to the table) then the character's Slight of Hand skill is 14 + 4 = 17.

If a skill is keyed to two attributes, skill level is calculated by averaging the the two attributes and adding the Skill Bonus. For example, let's assume the Climb skill is keyed to DEX and STR. If a character has half (1/2) a skill point in Climb, STR 12, and DEX 18, then his Climb skill is:

(12 + 18) / 2 + 0 = 30 / 2 = 15.
 
The same character with 16 points (for a +5 bonus) invested in Climb would have a Climb skill of 20.

An approach like this will take advantage of two well understood approximations used in simulations:

1. The bell curve. Ability score distributions are based upon a bell curve. This bell curve comes from rolling 3d6 for each ability score. Middle scores such as 10 and 11 are much more common than scores of either extreme. Statisticians have observed that natural phenomena such as height, weight, strength, intelligence, and yes--skill--measurements in populations are distributed in a bell curve. Bell curves are good tools.  Certainly other methods have evolved in D&D to generate ability scores such as the point-buy systems, elite arrays, etc., but these alternative systems still assume that extremely low and extremely high raw ability scores are rare. By using the raw ability scores in skill calculations, skill scores for a population will also approximate a bell shaped curve.

2. The law of diminishing returns. When learning something in general, improvement comes at a greater cost each step of the way. Using the exponential skill point cost structure given in the table above, it is clear that any more than 16 skill points in a skill would be hard to justify since a player could put those points to better use broadening a characters skill base instead.

II. Skill Checks

Rather than setting Difficulty Scores to activities and rolling a D20 + Skill Modifier to see if a character meets or exceeds the Difficulty Score (as was done in D&D3.5) I propose a method that turns this upside down:

You want to roll under your skill score

A basic skill check: Roll 3d6. 
A trivial (easy) skill check: Roll 2d6. 
A difficult skill check: Roll 4d6.
A really difficult skill check: Roll 5d6.

If your roll is less than your skill level, you succeed. If your roll is greater than your skill level, you fail. If your roll equals your skill level, you have partial success.

Mitigating and aggravating circumstances can affect the number of d6 required in a skill check roll:

Aggravating               Mitigating
Rushed                        Taking extra time
Improvised tools           Masterwork tools
In combat*                   Fighting a favored enemy
Can't see                      Receiving help from a skilled character 
Shaken                        Under the effect of a divine favor spell
ReallyDifficult (+2d6)    ReallyEasy(-2d6)
Untrained                     
Cursed

*In combat: When using a non-combat skill.

In general each aggravating circumstance will add a d6 to the skill check, increasing the chance of failure. Each mitigating circumstance will subtract a d6 from the skill check, increasing (and possibly ensuring) success. Remember, in this proposed skill framework you want to roll a low result, so more dice increase the chance of failure.

Discussion/Summary
This solution serves as a starting point for further exploration. Some open questions remain. For example, how do we resolve opposed skill checks? What happens when the skill check roll equals the skill, and limited success is the result? How many skill points does a character start with? How many skill points does a character get each level? Do some classes have advantages with some skills, and if so, how do we incorporate these advantages while retaining game balance? How do magic items and spells affect the robustness of this solution?

This has been a sketch of an alternative skill framework that may have some merit. The proposal uses raw ability scores (rather than ability modifiers) and an exponential growth in the skill points required to increase a skill modifier. This approach has the two simulation advantages described as:
1. The bell curve.
2. The law of diminishing returns.

This proposal may also have these advantages:

3. A simple but robust game mechanic that at times ensures success, and rarely ensures failure (but miraculous rolls such as all ones and twos may be needed to succeed if rolling four or five d6s).

4. Interesting ways to incorporate luck, divine favor, curses, or DMs judgement. For example, luck may be implemented by having a player roll one extra die and discarding the highest die when making a skill check. Divine favor may be implemented by removing a die from the roll. The DM may judge a particular application of a skill to be "good role playing" and award a mitigating factor (removing a die from the roll).

5. (Hopefully) Game balance. By keying skills to ability scores and diminishing the returns of skill point investments in a particular skill, we simulate real-world trade-offs between skill generalization and skill specialization. 

I leave this to you to discuss. Thank you for your kind consideration.