I like this idea and it could make some very interesting game play. Having some more npc's to talk to would be good.

To repair an item you bring it to the black smith and if it's just basic iron weapon all you'd have to do is pay some copper depending on the level. If it's something like admentite or diamond or some rare element like that, the black smith would assign a task to you, I require these items to repair such a strong item. You bring all the items require and pay his fee to fix it.

As for making gear blast protective, I believe you should only be able to protect it from one type of blast and it would require a piece of dragon gear of the type you wish to protect against and of course the smith's regular fee.

Of course this could help put Thror out of business but he needs some competition anyways.