Hmmm...for a nightmare mode, what would your thoughts be on the following changes/tweaks:
1. Increase enemy HP by 25%
2. Cool down on Health Potions and the amount they heal for. In addition to the number that can be carried
3. Increase the amount of Exp. points required to level up from one level to the next level.
4. Increase the level requirements for high-powered loot.
5. Fix enemy scalling when entering new areas.
I think Enemy HP (and damage output) is more or less fine. Perhaps a bump just for the sake of a difficulty raise but it shouldn't be the primary source of changing things. I'd personally like to see that mini-bosses/bosses are given permanent Relentless Assault so you can't flinch them. Fixing itemization should handle the primary ways of just steamrolling encounters.
As for leveling, I think it's better to fix the underlying system for the enemies rather than the player's leveling speed. For instance, scale them the same way as the current system but as (PlayerLevel + 2). If a zone scales 15-25, have it stay that range but at level 25, they're effectively level 27 instead. Just an example, not really sure if this would mean much overall in the end (and still wouldn't fix the outleveling of content without raising some level caps in zones).
I think the most effective fix is simply a global cap on any form of multiplier. Blacksmithing is not all that broken if +% damage caps at, say, +50%.
I dislike that because it puts the same limitation on Uniques/Sets, though I wonder if you'd reach a maximum that way anyway. I'd rather limit what you can produce from Blacksmithing itself than limit what you can reach. Though, that's more from the viewpoint of fixing itemization as a whole rather than rebalancing the game. Perhaps some kind of combination of the two.
I think I would prefer to fix Blacksmithing on the bonuses you can stack rather than capping what you can reach. Removing the ability to put +Damage Resistance multiple times per equipment slot would go a long way to fixing invulnerability, for instance. I'd rather limit what Blacksmithing can produce so it's not the BEST option for every possible bonus you could imagine; it should be the BEST option for tailoring equipment to meet your build but not the best everything always.
As far as Sagecrafting, I feel like it's actually not a big deal except in conjunction with Blacksmithing; I would probably remove the ability to add gems/sockets to Blacksmithed gear altogether. It trivializes socketed gear - Sagecrafting needs to stand on its own as a skill more, like Alchemy and Blacksmithing already do.
Like I said above, maybe make it to add Shards rather than finished Gems? Makes it so you're adding minor amounts of resistance, Armor, HP, or Mana for that slot rather than the completed gems. Kind of makes the bonus a bit underwhelming though, I suppose.
As for Sagecrafting, I really like the idea I put on the Reckoning forums of giving Sets a socket as you equip multiples. Sagecrafting doesn't get to stand out by itself much just due to the lack of useful socketed items. Maybe add them to (more) Uniques? Don't know if that's excessive or not, though ...
Just feels like there's not a good source of equipment to actually USE Sagecrafting on besides the current implementation of Blacksmithing. Without Blacksmithing, I'd probably never use Sagecrafting instead of Uniques/Sets, to be honest.
Also, I'm a Level 22 pure Sorcery on Hard and I'm just wandering around in Erathell now, which is my first region after leaving the forests. I haven't touched Blacksmithing thus far and the game has remained fairly challenging. If I start playing sloppily, I can get killed quite easily by regular mobs around the plains. Am I doing it wrong or does the difficulty only drop significantly later on or only with Blacksmithing?
Blacksmithing is a good chunk of it but it's a combination of a lot of smaller things that add up. Not using Blacksmithing is probably the easiest way to make the game harder for yourself, however.