Finding a Forge will allow you to access the crafting system.
You can combine two magic staves. In most cases this will make the first stave more powerful by the order of the second stave (for example, a Fireball+1 crafted with a Magic Missile+2 will result in a Fireball+3).
White Wyrm Spine + Dagger
Wasp Queen Stinger + Dagger
Spider Queen Fang + Scimitar = Fang (unique sword)
Fire Ant Carapace + Leather Armor
Golden Sphere + Rope = Amulet of Detect Gold
Finding a Magic Desk will let you copy scrolls, provided you have a blank scroll in your inventory.