In general, it doesn’t need to be a problem
You should trust your players before even starting a game, and as long as you trust your players, you don’t need to know the complicated details of how their classes work, just the general gist of their capabilities and limitations. They are aware that you are new, so they should be trying to help reduce your workload by taking care of their own characters.
If the Challenge Rating system worked better, you wouldn’t even need to know that, but unfortunately CR is almost worthless so you have to think about what your players can actually do versus what a monster can actually do, regardless of their relative CRs.
In this specific case, they have me worried
The Diplomacy rules (and, to a lesser extent, the other social skills) are extremely simple and tend to work pretty poorly. Most groups basically ignore them and determine success in social encounters primarily through roleplay where players and the DM try to roleplay a given character’s relevant social skills accurately.
However, this becomes extremely difficult when Diplomacy is optimized, because by the rules Diplomacy DCs cap fairly low and it’s possible to make Diplomacy hit the highest DCs in the book very reliably, even from a low level. Assuming you don’t want to play a game where the PCs can effectively mind-control everyone they talk to (without magic!), you have to ignore the rules, but that gives you very little idea of how good a, say, DC 40 check should be.
Worse, 3.5’s ruleset focuses heavily on combat. That’s what 90% of the rules exist to define. If you are not fighting, the system is extremely bare-bones; most of it comes down to “roll a d20, add your bonus, hope it’s high enough. If not, try again if you can.” There’s just not much available in the way of tactics or choices, it’s just a matter of how well-prepared you are and how high your numbers are. This does not make for a very interesting game.
Thus, pacifist diplomats simply don’t fit 3.5 very well. The system just isn’t good at describing the adventures of such characters. There are numerous other systems that handle it far better (I strongly recommend FATE here), but ultimately Dungeons & Dragons has been shaped, from its roots to the present day, to focus primarily on, well, exploring dungeons and slaying dragons. It can handle more complex games, but the further you get from the dungeon-diving paradigm, the less well D&D is going to work. Pacifist diplomats is about as far from that as you can get.
Finally, I suspect (and fear) that they may be using the apostle of peace class, and the associated Vow of Peace feat, from Book of Exalted Deeds. In addition to all the above problems of trying to force a very different style into D&D’s fairly narrow focus, the apostle of peace is ludicrously overpowered (high-level spells earlier than you’re supposed to get them, extremely potent defenses, radiates an aura of “you can’t do that,” etc). Worse, if there are other members of the party, having the apostle of peace around will badly impact their characters. With an apostle of peace as an ally, you take penalties for violence (even though you do not have the Vow of Peace feat yourself), plus you are magically inhibited from being violent or aggressive (it’s almost impossible for a barbarian to use Rage with an apostle around, for example, unless the barbarian wants to kill the apostle).
Conclusion
All games revolve around what is known as a “social contract,” the general agreement among the players (DM included) about what sort of game they want to play. Most groups don’t explicitly talk about the contract, it’s purely based on the setting, the system, the people (assuming you have played together before), and the stated premise of the campaign. Part of the social contract at many tables is to keep your character within an acceptable power range, neither overshadowing other players nor being dead weight. Assuming your group is full of mature and friendly players, a DM should not have to know intricate details of each player’s character; each player should be designing the character to fit within the social contract of the game.
However, the system that you are playing is also a part of the social contract. Choosing Dungeons & Dragons implies certain things about the game you are going to play, and choosing 3.5 specifically implies certain other things. Considering the heavy focus on combat in the rules of 3.5, combat is usually expected, both by the system itself and by the people who agree to play it. Thus, most players in a 3.5 game are going to show up having spent a fair amount of time, in the construction of their character, thinking about how that character will act in a fight. For one or two players to show up with a pair of characters that not only do not intend to fight, but indeed even expect to prevent others from fighting, is not obeying the usual social contract expected of a 3.5 game. It both means that the system is not well-tailored to the game, and that other players who were operating under more typical assumptions may have wasted their time developing characters whose skills will go unused. Plus, as you have noted, it wastes a great deal of your time, having prepared for a more typical 3.5 game.
Thus, I would consider your players’ characters to be outside the scope of the social contract for this game. They just are not appropriate. You should ask them to shelve those characters for another game, quite possibly in another system that better handles them, and create more fitting 3.5 characters.
Yes. Lab description (find it here) says:
This lab is used for making alchemical items, and provides a +2 circumstance bonus on Craft (alchemy) checks. It has no bearing on the costs related to the Craft (alchemy) skill. Without this lab, a character with the Craft (alchemy) skill is assumed to have enough tools to use the skill but not enough to get the +2 bonus that the lab provides.
So yes, even without common sense laboratory = equipment, description of what lab is ensures that it is in fact sufficient, and that it not only allows you to use alchemy, but also gives you bonus.
Equipment parts and supplies that gets used up / damaged regularly, like oil for heaters, charcoal in filters etc is included in material cost of alchemical creations already. Treat them as raw materials, because complicated, hard to get by things are made to last. And for other things like broken vials and flasks - we don't care for nicks on swords, we ignore minor damage on armor, why would we care for minor wear on lab?
Best Answer
Unless Warcraft changed something, mundane crafting does not cost XP
Mundane crafting requires Craft skill checks, but no Item Creation feats, and the costs are only time and money, not XP. Specifically, they cost a mere ⅓ of the base price of the item, but crafting takes a number of weeks equal to
where P is the item's usual price in gold pieces, DC is the Craft DC, and check is the crafter's Craft check result. This formula results in phenomenally long times, but at ⅓ the cost there is a lot of savings.
Magic items require XP, but that is easily replaced
In many places, XP costs are replaced with gp costs or vice versa at a 1:5 ratio. Since magic items cost 50% the base cost in raw materials and 4% the base cost in XP, you can apply the same conversion: five times the 4% is 20%, which can be added on to the existing raw material cost to get 70%.
Thus if magic items simply cost 70% of the base price to craft, instead of 50%, but don't require XP, this is consistent with the original system. Taking an Item Creation feat only enables a 30% discount but doesn't leave you behind.
I have played in quite a few games that make this change; it didn't dramatically improve the popularity of Item Creation feats for players, but it does make them much less of a headache for the DM.
If playing with Eberron Campaign Setting (the book, regardless of whether you play in Eberron) in play, the artificer and Artisan feats do require a little more tracking: it is important to remember that 50% of the base price is the original raw material gp cost, while 20% is the "XP" cost. The artificer's Craft Reserve and Retain Essence class features, as well as the Artisan feats, should be applied before adding these together as the 70%. The Craft Reserve should also be multiplied by 5 gp/XP for consistency.
If either is too expensive, these items were not intended for characters of their level
These processes both result in significant discounts. The value of items is used to control the power of items that players have at a particular level, which is part of the system used to try to ensure that enemies the same level as the players are challenging without being impossible. Making items cheaper or giving players more gold may allow them to steamroll opponents; making items more expensive or giving players less gold, or giving them gold but no place to spend it, may leave players without the tools they need to contribute.
In my experience, there are many classes that just barely find the default wealth rules sufficient for their needs – if they spend carefully. Other, more powerful classes are not nearly so needy, and could do with less. As a result, reducing wealth is something I strongly recommend against – it disproportionately hurts the classes that were already weakest.
On the other hand, I tend to find the system has a fair amount of room for extra wealth before players really start to steamroll. Thus, your choice to make it easier to get items is a move in the better direction.
But do be careful; wealth expectations are a rather fundamental design assumption of the game. Great care should be taken when modifying it. I tend to recommend that new DMs stock fairly close to the guidelines. It takes experienced DMsa lot of care to get modifications to wealth to work the way they want.