I was thinking I might go down the route that not all attempts to make a magic item work, or at least not properly, when made by mortals. Items can turn out only slightly magical, or entirely unmagical, with the quality of the materials used and the skills of the craftsman having an effect on if you get a mere +1 generic item, or an item worthy of fame and reknown.
Various eldritch beings and some demons would be able to make things using their own uncanny nature, so a demon can make items infused with their non-mortal essence, and the Witch Gods and their more powerful servants can make things with their eldritch essence. Would need to sit and work out what Demonic and Eldritch item powers would look like. I'm thinking that 3 levels of 5 powers each should be plenty of options for stuff, but actually sitting down and working out powers and then doing the math to balance them will be a bit of a chore. Especially since some damage types are way better than others, so a poison/disease powerset will need a lot of stuff to make it useful compared to a necrotic or radiant themed one.
On a similar note to conventional magic items, I plan to incorporate rules for flesh-grafting and flesh-crafting, the former being the addition of new parts to living creatures, the latter being the fusion of multiple organic beings into one creature. The 'forbidden art' has no clear origin, but is generally believed to have come from ancient worshippers of the Witch Gods who blasphemed against their own deities by cavorting with demons and combining the dark knowledge of each in a perverse form of magic and surgery. Both practices of the art are illegal among almost all societies with specific exemptions, due to the often horrifying nature of the process. Basic prerequisites in 5e would be proficiency in Medicine, Arcana, Alchemist's Supplies, and/or a copy of some instructional text, preferably all four.
Flesh-grafts are used as emergency life saving procedures, to replace missing body parts or to augment soldiers by morally dubious lords. Grafts often fail, the attached or inserted flesh being rejected by the host and rotting inside them, usually leading to death by sepsis. When it works it can do great good, but more often wreaks horror. Grafters are back alley surgeons, often doctors driven to desperation by the loss of patients or academics with a morbid fascination with the forbidden art. Such practicioners are often lax in proper medical or magical practices, the grafter has little to lose and the patient is usually in dire need of any possible help and will overlook dirty instruments or dubious locations of business. Successful grafters have generally perfected their art by leaving a trail of mutilated corpses in their wake as they evade the law, usually eventually finding a powerful patron to serve in secret or finding a place among outlaws and the dregs of society.
Inspired by the Slith from Grim Dawn, flesh-crafting works best on young specimens. Mature subjects more often reject the melding of their flesh with another, and subjects composed solely of animal tissue struggle to adapt to their new anatomy. As such the few secretive practicitioners who have found copies of the fragmentary documents that detailed the creation of the first trolls turned to the use of humanoid children and young animals, a process far more likely to succeed in a successful melding. Fleshcrafted beings are almost always beastmen, perverse combinations of human and animal anatomy, with stunted mental development and chronic pain and health conditions. These unfortunate beings are occasionally able to breed true, becoming a self-propogating race of misshapen and miserable creatures. Save the creator of the orcs and goblins no one has ever managed to imitate the pinnacle of the flesh-crafter's art, the trolls, for the faiths of various gods deemed flesh-crafting an abominable act of heresy and sought to scour the knowledge of it from existence. Fragmentary texts, poorly transcribed and poorly translated are the only documents that detail the original practice in any measure, though some flesh-crafters have written their own treatises to be disseminated through the lands to try and advance the collective talents of the various individuals, cabals and clandestine colleges that practice the art.
The lost secret that made trolls as successful as they are, even with their flaws, is that they were melded with beasts before they were even born. The ancient sorcerer who made them vivisected pregnant humans and animals and melded the desired traits of their unborn offspring together. After years of perfecting this particular practice, the mage was able to turn the unborn into the first trolls, giant men and women with the strength and durability of oxen and elephants, but the intellect of men. The race was able to breed true, and outlived their creator but fell from glory as the defects that they inherited from even this perfected process took their toll on subsequent generations.
Suspected by some flesh-crafters but not generally accepted, the halflings were created through the same process, though even the most thorough dissection fails to find any obvious signs of the diminutive creatures being made this way.
Flesh-crafters are accepted only in a few places, and only within certain limits of their craft. Various faiths have adopted the use of specific strains of beastmen as temple-soldiers, generally ones that incorporate animals associated with their god. The populations of these clerical guardians is kept extremely limited, and the means of their production a closely guarded secret. Pre-pubescent aspirants are selected to be initiated into their ranks, leaving their families behind to reappear years later as beastmen indoctrinated to serve the needs of the clergy.
A rare few nobles have made use of flesh-crafted races in their armies, using more monstrous specimens as living siege weapons or instruments of terror. These nobles are often difficult to topple, the power of even a few minotaurs or similar beasts attached to a regular force being more than capable of routing an enemy army, but inevitably most such lords perish. Witch hunters, holy warriors, assassins, military alliances or even their own beasts seeing them die in their bed, in a feast hall or in the ruins of their castle.
As the players will be Witch Hunters, my thought is that they are to some extent above the law as long as they continue to fulfill their duties. No one person is easily able to punish them if they decide to replace their eyes with those of a cat, or have gills added to their armpits, or make a homunculus out of a dwarven orphan and a badger, much as no one can stop them from worshipping a Witch God, dealing with demons or using forbidden magic, provided they do so reasonably discretely. Other Witch Hunters could try to kill them of course, but doing so with official sanction would require a trial and that means getting enough hunters who care about what's going on together to be the jury and the witnesses of the trial. In theory the highest ranking hunters could strip them of authority and condemn them, but most of them are far away and more than a few are prone to using the darker arts themselves.