Reminded a lot of the experimentation I had with wandcrafting in Noita and the alchemy type of games (Water+earth = mud, goblin + arrow = archer, etc.
The health/blood potion is a must, fire is suicidal (died twice, once with a fire potion (whyy?!), and once to a neverending fire I caused to myself with a fire arrow), single Ex(plosion) is the most simple, instantaneous, direct and efficient damaging spell (blow an small area very fast).
Compared to arrows (that can miss), swords (that can bounce off walls, a nice detail) and fire (that can damage you a lot over time), I supose explosion could be more expensive in the wand cooldown (IF you want some balance. Balance and fun are not the same, and fun is more important for a game.
Still have no Idea what the rune does, or if gold have any use besides be tossed like stone and wood. Took some time to understand that the feather increases the speed of the arrows. Was kinda of sad to not have found any combination with 3 materials, so that made me avoid getting the 4th material slot.
In the end I had 1 [Explosion], 2 [blood][flask], 3 [feather][arrow-homing][empty], 4 [arrow-homing][blue-goblin], 5 [sword].
I like the prototype. This may be mentally demanding to keep expanding while still being interesting and not just more of the same, but with so very few "spell-crafting" games out there, this could be a good adition.
Spell-crafting games I remember from the top of my head: Noita, Magicmaker, Mages of Mystralia, Magicka (1/2), heard about Two worlds 2 but still haven't played, Lichdom:Battlemage. There was another one that each spell had to be programmed with drag and drop mechanics, but can't recall the name. I hope this helped =)