I like the general idea of a skill and gem-based magic system, and I also think that, with some variations, it might also be used for other entities eventually - for example, tribal humans might have a Shaman which would use animal body parts and plants instead of gems. While the game is dwarf-centered now, don't forget there's plans to eventually allow a "Wizard Tower"mode.
Of course, magic is something that will be implemented..much later in the game.
I'm not a fan of wizards throwing fireball and lightning bolts, I prefer a sword and sorcery style, which this magic system might fit well with.
However, I have one small nitpick:
rather than just imbuing gemstones, why not allow the player to "distill"elemental energy at the workshop to create already imbued gemstones?
Like, a "pure fire gem"or something.
This would of corse require a lot of time, much more than simply using captured elementals, but it would mean you would be able to use this magic on gem-less maps.
Also, you would have to be in the appropriate setting.
essence: distilled how/where:
fire must create a big fire near the workshop
darkness must have the workshop deep underground in total ground
salt workshop must have saltwater around it.
ice workshop must be surrounded by glacier squares
water a lot(70?) units of water will get you a gem
lightning must be on a stormy maps
air workshop must be located very high above the ground
death workshop must be near rotting corpses/tombs
miasma workshop must be surrounded by miasma
and so on...
Also, I think some gems might have more specific effects when used in specific items. For example, a TIME gem set in a bed might make the user of the bed sleep "faster", that is, he would sleep for less time than normal. You could also use a LIFE gem in the bed, which would allow to heal faster and also possibly heal "nervous"wounds, like the spine. Putting a FEAR gem in a totem or something on the gates of your fort might scare enemies away..