I know there have been a lot of thread sike this before, though I haven't seen many of them. I just wanted to post my take on how a magic system could work.
So basicly it would consist of tow sides. There would be Mages and Priests.
Mages would channel elemetal powers that are not from a blessing of a god, but come from the users' ability to cast magic. Mages would have two attributes that would factor in on magic use. These would be "Magic User" and "Magic Focuser". These two skills would go from Dabbling to Legendary like any other.
Magic User would denote the Dwarfs ability to conjure and channel magic. This would decide how many charges a magic artifact has for him to use. More on this later.
Magic Focuser would be an ability to actually direct the spell he is using so it hits where he aims. The higher this skill the less spells will burn out or strike the wrong spot.
The Mage himself could not preform any magic, but would need a staff or other magical artifact to do so. At the moment of their creation, artifacts would have a certain amount of magic in them available for use. Say, 1000 magic points as an example. The higher the Magic User skill the less points it takes for the mage to use the artifact once. So, for a Novice, it would take 150 points to cast a spell, for a Legendary one it would only take 30. An artifact would always be dedicated for one type of spell, ie. a Staff of Fireball could only have the Fireball spell.
Once the staff runs out of magic points it is just a useless piece of whatever it's made of. The higher quality the staff the more points it starts with.
Staffs would be the general source of magic for your Mages. You would have to make the staff out of whatever material you wish, and encrust it with a gem. Certain gems would have certain magical powers dependent on how they were cut. For example, a Ruby cut a certain way and encrusted in a staff would give you a Staff of Fireball, while a ruby cut a different way would yield a Staff of Fire protection.
Artifacts created during moods might hold somekind of magical power regardless if and what gems they might contain. The worth of the artifact decreases as you use up it's magical power.
Elemental magics would be primarily Destructive or Protective magics. Destructives would be either area of effect hitters that deal relatively low damage, but do so on multiple targets, or large damage dealers that target a single square. These would burn, freeze, slow, knock back, stun, petrify or otherwise damage your enemies. Protective magics would give your friendlies resitance against one of the previously mentioned effects.
Priests would be dwarves who are devout worshippers of a deity. You would need to designate a temple for them and make an altar. Priests would pray to the deity for it's favor and in return the temple would receive Blessing "points" from the God. Depending on their personality and sphere some gods might want blood sacrifice, others material sacrifice such as burning wood at the altar or offering wine, gold etc.
Priests wouldn't need any traits for their magic, only their devotion to their God. The more dwarves you have regularly praying in your temple, the faster you receive Blessing points from the God. the drawback of this would be that large Sects would start mandating suff much like Nobles do and the bigger they become the more their desires grow.
When you have enough Blessing Points in your temple, the God would mandate the making of an Artifact, specifically. For example the God of Light would tell you to make an Iron Crown encrusted with a Large, star cut Sapphire. If you manage to make such an arifact and place it at the altar, the God will imbue it with power. This Artifact could then be used by any Dwarf who is a devout worshipper of the deity, and it's power would come from the God in question, through the altar it was made on, using the Blessing points your temple has. As long as the altar stands and your dwarves are praying and giving offerings to it, the Artifact will not run out of power. The more worshipers you have the more artifacts you can construct (1 artifact at 10 worshipers, 2 at 25 etc.)
The spell the artifact can cast is dependent on the sphere and personality of the God. If we stay with the previous example, the God of Light would give you an artifact that can cast spells such as Turn Undead, Clense water, Remove disease, Remove curse, etc. Each God would have a collection of possible spells defined by their sphere and an artifact would get a random selection of these depending on the quality of the artifact. I'm thinking 2-3 spells per artifact. Higher quality artifacts would have a higher chance of getting better, more powerful spells. All artifacts of the same God would draw from the same blessing pool.
Some spell ideas I have:
Note that this is not a complete list and these are all just preliminary ideas and a lot of balancing would be required, also they are not meant to be the same difficulty to cast. Many of these would require saving throws from the caster or the target and the extent of their effects are dependent on the quality of the artifact/staff used.
Turn Undead: In an area around the caster, all undead make a saving throw. All who fail it die instantly. If they fail it real bad they turn against their previous masters or each other and die when there are no enemies left.
Protective spirit: Cast on the coffin (resting corpse) of a dead Dwarf, the spirit of the defender is bound to that place and will rise if any enemies come near, to defend the honored dead and their belongings. Spirits can only be hurt by certain materials or magics(?).
Remove Curse: Pretty straightforward. Saving throw required.
Remove Disease: Also self explanatory. Cannot cure physical wounds but can cure rot/infection. Saving throw required.
Clense water: Makes murky/muddy/stale into fresh drinking water. Cannot desalinate water.
Calm Animal: Calms enraged wild animals and war animals stop fighting for a certain time. Saving throw required.
Calm Entity: Makes weak enemies stop fighting for a certain time. Ends tantrums. Saving throw req.
Banish Demon. Demon makes saving throw. Win- nothing, Fail- knockback and damage, Fail bad- stun and cripple.
Calm Forgotten: Saving throw Win- Nothing, Fail- stop fighting for a time, Fail bad- Flee back to the darkness.
Holy Light: Make Dark areas into Light areas for a set amount of time.
Darkness: Opposite of the previous.
Summon Demon: A Demon is summoned to your side to fight for you for a set amount of time
Create undead: A fallen friend or foe is brought back as a zombie or skeleton. The sight of an undead friend would probably upset dwarves though.
Restless Guardian: Same as Protective Spirit, but the defender will rise as an undead warrior, then lay back to rest when foes are gone.
Master of the Wild: Animals in an area will be enraged and fight for you.
Bestow Minor Curse: Curse an enemy with lowered stats.
Bestow Curse: Curse an enemy with greatly lowered stats and possibly other ill effects.
Bestow Major Curse: Cripple an enemy with deadly effects.
Transmute ore: Make a targeted bar of metal ore into a more precious one. Iron->Gold, Gold-> Steel etc.
Soften stone: Make an area of solid stone as easy to clear as soil.
Blessing minor/major: Raise attributes of friendly targets for x amount of time.
Elemental Shield: Provides protection against the element the target is hit by first after being cast.
These are all just off the top of my head. Note that these are all God given spells. Mages use staffs made by you and are either destructive or protective, usually elemental type magics.