Which do you find more satisfying and why? I've got a very large, open-ended game universe that needs to be filled with stuff and I've been trying to decide how much of it will be gear ingredients versus completed gear. Making gear seems to serve player creativity. You can get a lot of gameplay out of finding/trading/stealing ingredients and in the end of the process the player has the enjoyable benefit of coming up with precisely what they want. Finding gear seems to serve exploration, the thrill of discovery and the lore of the game world. There's more of a reward to going places, braving dangers and trying to figure out where things are. Plus you can use what you find right away, a fact I think which makes a game addictive in terms of how players respond to enemy drops in combat. It's possible, of course, to have both and I think this would deepen the game. But I wonder what the proportion should be. If the player can create too much it diminishes the value of what they can find. Yet if they can't ever rival what they can find with what they create, why create much?

there is a perfect answer and that is unique or very rare ingredients.

certain finds can be a certain type of metal that has special properties.
the player gets to use that material in their own way and make unique personal items.
and it also requires exploration and discovery.

I agree. If you reward exploration with the discovery of unique materials you will also make item creation a thrilling experience, leaving undiscovered possibilities with every undiscovered location. In a way, that would give each weapon its own geographic identity, which in a large JRPG-style universe with unique cultures would be especially neat.

The only problem I see with one-of-a-kind materials is having to face the choice of what to make with them. I'd hate to see a material have exactly one application, but I'd be frustrated to have to choose between making an epic shield or an epic helmet. This would probably be less of an issue if you had enough magical one-of-a-kind elements to make an entire outfit, but it still would bother me. Maybe you'd have to include hard-to-find duplicates.

I'd claim that the production of items is the superior choice.
1) I really enjoyed the alchemy in Oblivion. You pick up everything you see, and then can produce tonnes of random crap. And most of it IS crap. But the combinations that you end up making you money OR directly benifiting your play style. Consider also, that the particular ingredients that you always want will force you to explore particular areas of the map. Properly spacing ingrediants causes exploration.

2) There seems to me to be more of a sense of progress.
For instance: you know that item X is a level 94 item, so you need a level 94 creature to have a 1/1000 chance to drop the item.
But with ingredients, you can make ingredient 'A' drop with a 10% chance from anything level 94. Then tune it so you need 100 ingredient 'A' to make the item. On average, the chances of getting everything is the same. But the player doesn't feel like he is being cheated out of a single dice roll since he constantly sees progress towards getting the item they want.

3) In answer to your last question, I think it comes down to what use the items are that you create.

Sometimes having something like a EMP bomb that kills all the enemy ships is just better. Sometimes having an omni damage bomb that does less overall, but can hit equally hard against any resist is the better choice. Usually creation systems let you make that more "omni" item. It might not kill anything as fast as the best item you can find, but you don't have to constantly swap weapons because you aren't attacking the hole in the enemy's resists.

Sometimes having "real" loot drops means that the game drops too many useless items. And if it doesn't, then it either drops too little, or feels like it is handing you exactly what you need. None of those solutions are rewarding. In a multiplayer game it is alteast somewhat forgivable, since you can assume that while you dont use ECM modules, someone else does, so you are selling to someone who is buying. Instead of just selling to a faceless NPC that pays what the designers choose. But in a single player game it is nice to give the player some way to feel like he could do something other than chuck item X at the store for more heal potions (like craft it into something that can cast heal!).

My vote is still heavy towards the crafting of items, because it is more flexable to how a player wants to play the game. If you balance around crafting so that you have normal (90%power) crafted (100%power) and epic (125%power) items, then people who don't craft still make progress, and since they have a chance at epic drops, they won't feel cheated. People who do craft will fell that they are pulling ahead of the curve, but still have a reason to farm for the really rare items.

I like to see both get some love, with the effort required to get good stuff from either source being roughly balanced.

I love to bring up Dwarf Fortress, so I'll do so here. Every goblin that attacks your fort has some piece of crap iron weapon, and any skilled metalsmith with a little metal and some time can make better gear, but not every fort has the resources and infrastructure to make high quality equipment, so you'll often find that a few drops from gobbos will be better than the copper stuff your smiths produce. At the same time, a site with lots of iron and some flux stone can be mass-producing steel gear that no non-dwarf civilization is capable of building. Finally, there's ultra-rare adamantium stuff, and the odd artifact-level item, which cannot be made at will under any circumstances.

So you've got low-level built stuff, which requires little investment and can equip a whole platoon, you've got battlefield pick-ups of dubious quality, you've got the output from dedicated arms manufacturing industries and you've got rare artifact/prototype items than occur maybe once a decade in one location on the planet.

That way, you can scrounge for gear, make crude gear, scavenge decent gear, make decent gear or make excellent gear, and then there are a few really spectacular things that you can either get lucky and produce through manufacturing or get lucky and discover on adventures. Works great.

For the record, I consider trading for equipment to fit into either category, depending on whether you're shopping at specialty stores or placing an order with a major development firm.

I've always liked games where you build your own stuff but I don't like that to be the focus of the game. For me building adds to an adventure game as long as it is something you can kick off and just let run in the background. You have complete control but you don't have to micromanage it...