I'd say allow him to turn points of shield AC into DR at a 2-for-1 rate (or 3-for-1 if you're looking for a powerful class), up to a maximum DR equal to his class level. Maybe make it not work when he loses his DEX bonus to AC, so as to give another way to get around it.
3.5 doesn't have a class known as the Shield Master. Whenever you homebrew, you are implicitly changing the rules to some extent.Well, my game is 3.5, this class is 3.5, Sunder doesn't happen in 3.5.
In a magicless campaign, that is more of an issue, but even so, it can be made into a new use for the Craft skill.
No; he can easily have a backup. It wouldn't be enchanted, so it's not something he'd want to use long-term, but just until he gets a chance to fix his main one it could be ok.Your solution is probably "Hire someone to cast it". That would require the entire group turning around and heading back to nearest city, interrupting whatever quest they were on, and the whole way back, the fighter or shield master is useless in combat.