Just want to point out that Bayohne mentioned weapons and armor .... I surely hope that tools are included in that.

This way, EVERY class can participate in creation of materia. One possibility / hope / speculation is that the experience that went to the now-defunct physical level is used to create the "attachment points" needed to convert said item into materia.

Also, using an NPC (who presumably charges gil) to convert the items into Materia is a wonderful (imho) new gil sink. This system creates both a gil sink AND an item sink...