Yeah stick with the materia name. Also, this really does sound like a cool take on the whole materia system in general. Not only will it reduce people having a load of inventory, but if you find a weapon you cant use/dont need anymore, you can choose to sell it for gil...or just create materia to become stronger.
It should give crafters a reason to start making low rank items again too lol. Hopefully it wont be as insanely complicated as the evolith system from XI -_-