Pricing
OK, so there are basically three costs being added together here:
- Base cost of the Elven Thinblade: 100 gp
- Masterwork cost (prerequisite for any magic weapon): 300 gp
- +2-equivalent cost (+1 keen, as keen is a +1-equivalent): 22×2,000=8,000 gp
Total is 8,400 gp: outside of your budget.
A +1 thinblade would be 12×2,000+300+100 = 2,400 gp. A masterwork thinblade would be 400 gp.
The bonus from masterwork is a +1 Enhancement bonus to attack. A +1 bonus gives a +1 Enhancement bonus to both attack and damage. As bonuses of the same type, the Enhancement bonus to attack from being masterwork and the Enhancement bonus to attack from being a +1 weapon do not stack: you take whichever is highest. Since they’re both +1, you can take either.
If you were to make a +2 Thinblade, the +2 Enhancement bonus from being a +2 weapon would overwrite the +1 Enhancement bonus for being masterwork. More information can be found here.
Note that a magic weapon must be a masterwork weapon first, and that the first enhancement on the weapon is a simple +1 enhancement. That is, you cannot make a masterwork keen thinblade; it must be +1 before keen can be applied.
Wealth Sidenote
As a side note, 5,000 gp is only barely half what the book recommends (a 5th-level character typically has 9,000 gp, by the Wealth By Level guidelines, Table 5-1, on page 135 of the Dungeon Master’s Guide). I do not know all the details of your game, your fellow players, or the DM, but as an experienced 3.5 player with a great deal of system mastery: that worries me greatly. You are at a rather huge disadvantage compared to where the system expects you to be, and the system does not handle that well. If the DM intends to keep me at 55% of the wealth guidelines, I would want to see a very detailed and thorough analysis of all of the other things he is changing in the system to account for that. You cannot simply reduce the players’ wealth across the board, and expect the system to work as designed. It doesn’t.
The fact that the DM is further “trying his hand at DMing” indicates to me that he most likely does not have nearly the experience necessary to make such sweeping changes to the system. Don’t get me wrong: it can be done. The Wealth By Level table is explicitly a guideline, after all. But it is not easy. For a new DM, I’d want to introduce as few changes as possible, because every change is something the DM has to become responsible for.
Rules Compendium p. 150 (emphasis mine):
A reach weapon is a melee weapon that allows its wielder to strike at
targets that aren’t adjacent. Most reach weapons double the wielder’s
natural reach, allowing the wielder to attack at that reach but not
within its normal reach. A typical Small or Medium wielder of such a
weapon can attack a creature 10 feet away, but not a creature in an
adjacent square. A Large wielder wielding a reach weapon of the
appropriate size can attack a creature 15 or 20 feet away, but not
adjacent creatures or creatures up to 10 feet away. Tiny or smaller
creatures gain no advantage from reach weapons.
Rules Compendium p. 151:
A wielder gains no reach from a reach weapon that is too small. No
additional reach is granted by a reach weapon that is too big.
Based on those two things, we can answer your two questions:
- No. Tiny creatures threaten no squares around them, and reach weapons don't benefit them. As a larger reach weapon doesn't convey any extra bonus, they don't get any reach no matter how big the weapon is. (Though the mental picture of a tiny creature using a gargantuan halberd is pretty funny.)
- If the weapon is inappropriately small, they do not gain a reach boost at all. If it's inappropriately large, they do not gain an extra reach boost, but they would gain the normal reach boost for a creature of their size using a reach weapon. So a Dwarf using a large spiked chain gets the same reach as a Dwarf using a medium spiked chain.
I think your proposed feat is going to work as you intend. A fine spiked chain won't convey any reach, it'd just be like using a melee range weapon only doing a lot less damage.
Specific Q/A
Basic Question: Does a grig (MM 235) wielding a Tiny longspear (PH 116, 119) (2 gp 5 sp; 0.9 lbs.) threaten no squares, adjacent squares,
or squares 10 ft. away?
The grig is tiny, using a reach weapon. It therefore threatens no squares.
Then: What about a grig wielding two-handed a Small spinning sword* (Secrets of Sarlona 137-8) (50 gp; 3 lbs.)?
Threatens no squares. The spinning sword definition says that it's a reach weapon, and tiny creatures do not gain reach from reach weapons.
Then: What about a human wielding as a light weapon a Tiny longspear?
Threatens his natural reach only. Undersized reach weapons convey no reach, but they don't take away your natural reach (since said human could just punch that square).
Then: What about a human wielding two-handed a Large spinning sword (100 gp; 6 lbs.)?
Yes, the human would threaten squares 10' away, and 5' away (as the spinning sword works at close range, like a spiked chain).
Does The Rules Compendium Contradict The SRD/DMG?
No, it doesn't. The SRD's reach definition is as follows (emphasis mine):
Glaives, guisarmes, lances, longspears, ranseurs, spiked chains, and
whips are reach weapons. A reach weapon is a melee weapon that allows
its wielder to strike at targets that aren’t adjacent to him or her.
Most reach weapons double the wielder’s natural reach, meaning that a
typical Small or Medium wielder of such a weapon can attack a creature
10 feet away, but not a creature in an adjacent square. A typical
Large character wielding a reach weapon of the appropriate size can
attack a creature 15 or 20 feet away, but not adjacent creatures or
creatures up to 10 feet away.
Tiny creatures have a natural reach of 0. If you double 0, you get 0. Thus while the RC definition is lengthier, it doesn't contract what the SRD or DMG say.
The only thing in the SRD about oversize/undersize reach weapons is the bit in the above quote about using a reach weapon of the appropriate size. The RC expands on this, but again doesn't contradict what is said. (You could argue that in the SRD, an oversize reach weapon also doesn't grant reach as it's not "appropriate", but they didn't really spell out what they meant so I don't find the RC version problematic.)
Can A Tiny Creature Ever Get Reach?
Yes, as the DMG mentions:
Tiny, Diminutive, and Fine creatures have no natural reach. They must
enter an opponent’s square (and thus be subject to an attack of
opportunity) in order to attack that opponent in melee unless they are
armed with weapons that give them at least 5 feet of reach
That makes it clear that tiny creatures are not forbidden from getting reach, if they have some way to get it. Some examples of ways to do that:
- Shadowstrike (MIC) - On a weapon, activated to give that weapon +5' to it's reach. As it's just a flat addition to reach, it works even if the creature has 0' reach normally.
- Lunging Strike (PHBII) - Feat that allows you to make an attack with +5' to it's reach. Again this is a straight addition, so it works even if you had 0' reach.
- Inhuman Reach (LoM) - Feat that increases your character's natural reach by +5'.
What About Whips?
Whips have a different wording than the other standard reach weapons, as shown here:
The whip is treated as a melee weapon with 15-foot reach, though you
don’t threaten the area into which you can make an attack. In
addition, unlike most other weapons with reach, you can use it against
foes anywhere within your reach (including adjacent foes).
Compare to the Spiked Chain (another reach weapon that works in melee range):
A spiked chain has reach, so you can strike opponents 10 feet away
with it. In addition, unlike most other weapons with reach, it can be
used against an adjacent foe.
The "X has reach" wording on the chain is the same as you see for every reach weapon in the SRD, except the Whip. The first part of my answer covered how those work with larger and smaller creatures. But is a whip special?
- The strictest possible reading says that a whip is treated as a melee weapon. It also happens to have a 15' reach, and that number is specific. Does it change for larger or smaller creatures? The rules don't say. If you wanted to do a very strict reading, it's always 15', no matter the creature size. This starts to make no sense with gargantuan or larger creatures as it actually lowers their natural reach, and would give tiny creatures 15' reach with a whip and 0' reach with any other weapon, so it doesn't work very well at the table.
- A less-strict reading would instead say that a whip is a reach weapon (that can also strike in melee, like a spiked chain) that adds triple to the natural reach, instead of double for normal reach weapons. That means a whip scales up for larger creatures like other reach weapons do (except farther), and tiny creatures get no reach at all when using one. This has the virtue of being consistent with how reach weapons normally work. Also working in the favor of this one is that the reach weapon definition mentions whips as a reach weapon.
So for whips, it comes down to how much stock you put into the odd wording compared to other weapons. I can't give a reference for what the writers actually intended to do there, as one doesn't seem to exist. I do know that the second option is far more consistent in how it plays, so I would certainly favor it in actual play.
Best Answer
Size changes the cost of the base weapon.
SRD > Equipment & Special Materials > Weapons > Cost
Masterwork costs do not change with size or material.
SRD > Equipment & Special Materials > Weapons > Masterwork Weapons
So a Medium ribbon spinning sword would cost 350 gp, and therefore costs the kaorti who makes it 175 XP. A Large version would cost 400 gp, so 200 XP.
Typically, paying for services that cost the provider XP cost 5 gp per XP the provider loses, so multiply these XP costs to find their value to you: 875 gp for the 175 XP of the Medium ribbon spinning sword, 1000 gp for the 200 XP of the Large ribbon spinning sword.
As an aside, increased weapon size category is an extremely ineffecient way to improve your damage, and Monkey Grip in particular is an exceptionally expensive option for that bonus. Note that the greater base damage of the weapon is the only advantage that a larger weapon offers; reach, for example, is defined by your size, not the weapon’s size.