On one hand having precious and well known items being destroyed because you didn't repair them is lame. On the other hand completely disallowing the making of new ones is also not that great. So, the middle ground should be to have certain items that achieve certain value (for example, +7 prestige) become immortal and everlasting 
. They don't decay anymore or need repairs. They become legendary. In the meantime the advies should still be able to find new items and repair those. Break the system in two...minor artifacts and legendary artifacts and everyone remains happy: then nobles who are tied to their items, and the advies who still get to find/make new ones.
Given time, the item limit would be reached with these permanent items though.
I enjoy having an item and searching for them etc. Do not like how fast they degrade, they should not degrade while with an advy. If they degrade they should be lost. I usually pay 50 to a 100 gold per item, jut because I am an awesome awesome...
If items don't degrade while in the hands of an advy, people would have advy mules follow them around holding on to their items, and just take them back for important battles or whatever. If the items are only lost, well then the item limit will mean no new items are created for that island. Unless you want to clog the database storing the names and stats of 100's of items that could be found on every island but restrict it to 100 active items at a time.
