If it's enchanting or imbuing magic onto pre-existing items, then this is fine! We just don't allow item creation from nothing. So this should answer your first question, and the limitation that it only works for magic he knows is fine! We'd also like to caveat that in terms of rarity, he would mostly be able to make "basic" and "uncommon" with maybe the occasional "rare" type.

As for the cost, it would just be IC currency and materials, so you would not need to use reward points.

He will need to buy the workshop permit through the Rewards Shop, and you can handwave how he gets an actual workshop space. The size will be limited to basically one large room to work in and one or two small rooms that can be used as storage. But there are expansions that can be bought through the workshop to expand that space!