[RPG] Character backstory and history development/generation tools

I think the hat of disguise is a wonderful heirloom to start the game with. It promotes roleplaying and fascinating non-combat interactions. In my games I would expect characters to take one of five routes:

1. All characters can get an equivalent non-combat magic item of about that cost given a backstory. Then, if they want an item, they can go to equivalent effort and their choice is respected.

2. You may want to allow each player to nominate a book to involve in the game. In this player's choice, it should be the Tome of Magic. I've played a social binder (equivalent to a gent with a hat of disguise) at early levels for precisely this reason. The character may want to dip into Binder, because at level 1, he gets access to Naberius, which gives benefit to social skills as well as the ability to disguise self at will. It sounds like it fits his intentions perfectly, and there are a number of other capabilities that would benefit him neatly.

3. House rule a feat (due to the paucity of sources. Otherwise I'd use one of the extant ones) to provide disguise self once or three times per day, as per a caster level of the character's level. There are plenty of better things to do with a feat, but disguise self could be worth it to a sufficiently motivated character.

4. Invest heavily in the disguise skill, and some masterwork elves ears. While it's not as exciting as a full on disguise spell, bluff, forgery, and disguise do form the basis of the Rogue's repertoire for good reason. Disguising oneself as another race is a -2 on the check, which can be easily countered by the underwhelming deceitful feat.

5. The character starts out as a sorcerer, knowing disguise self and silent image. Using the fluff that "the magic's in the blood" it's quite plausible that he was casting spells in the crib. The rest of his levels can be rogue, flavoured with just that hint of the "alien, uncontrolled magic that is his heritage"

I want to preface my answer by saying that I understand where your impulse is coming from, that I respect it at least in part, and that I share that impulse. But with that preface, I must in good conscience push back against the frame of the question:

Consider Reining In Your Urge To Discourage

I respect and share your impulse, here. I really do.

Every time a player of mine goes off and does something like this, I have a little (or not so little) frisson of fear: What if they're going to break something I had planned? What if they're power gaming for an advantage? What if they touch my GM stuff?!

After a long career in GMing, though, it's rarely been an issue in the way I fear. Are power gamers gonna power game? Yes. But it turns out they're fairly easy to detect and shut down. Will the players occasionally do something that wrecks a plan? I can't actually think of a time that's happened, but I can think of several times that a player was pushing in one genre direction and I was pushing in another... which can be an issue.

But on the other hand, having engaged players who want to contribute to the setting is a blessing in many ways. First, it just means that they are active and are engaged which is a great thing in and of itself. Second, it means that in some sense, they're taking a little of the creativity burden off your shoulders. Third, when players do this in good faith, they are telling you what they are interested in! They're directly telling you something other GMs have to read tea leaves and pull teeth to get from their players. And fourth, sometimes (not infrequently!) a creative and engaged player will come up with something really good that you wouldn't have thought of that you can turn to your advantage.

Still, there are at least potential issues.

Meet Them In The Middle, With Approval

What I do, therefore, is to make clear the following things:

1. I welcome player input.
2. But I need to see it and approve of it before it's canon; that's part of my job as GM, enforcing the game canon.
3. If I veto something, I will whenever possible explain why, but sometimes in order to avoid spoilers, I won't be able to explain.
4. If this all works the way I expect, then over time you'll have a better feel for what I'll allow, and I'll have a better feel for what interests you, and we'll clash less and less. But while I hope to be more (not less!) easy-going over time, I always retain that canon-veto.

I've found this works pretty well. I'm only GM of my experience who explicitly spells out the fourth point, but that's certainly how it's worked out when I'm a player in a game that encourages player contributions. It definitely works from my side of the table when I am GMing.

Addressing some issues that have come out in comments, which may or may not make it into an edit of the question: I must stress that all of this regards background information, not questions of current NPC ownership or behavior. Different games address this differently, and even within 5e different GMs will have different levels of tolerance. At the very least, influence on current NPC actions strikes me as a qualitatively different question. (And if you think the player is angling to backdoor that sort of thing in through the submitted background, well... that's what veto power is for.)