With the provisos of it taking a full-round action to reset it and only lasts 1 round, I don't see it suddenly dominating the game. It would clearly be a magical item though. According to the magical item creation rules though, this would give it a base cost of about 2000gp...

Perhaps someone better versed in magic crafting can help you with that.

I'm also assuming the game is less than serious if there's a squeaky hammer involved. :p