My first thought when reading that last part of the post was "teehee, res sickness."

Honestly, though, I've been looking for a way to avoid the xp costs for items for a long time; we currently do quests for power components at the moment, but that's not sexy from a rules standpoint, even if it is hot for our group. This looks like a good start. You should probably increase the penalty to Con for creating items by about double what you have, and make it heal at the standard rate for ability damage (look at ability burn in the psionics material for a good way to do it; you can't heal that with magic, it has to heal on its own).