MB, That'd still be a house rule. . .essentially, as is, quality only matters if it exceeds material, the moment a lump of Laen is sufficiently dagger like for the GM to move it onto the dagger table, it's at it's laen materials bonus, until the craftsmanship bonus exceeds the laen material bonus . . .and a +10 quality bronze dagger is just as good as a +10 quality iron dagger, unless material quality bronze vs iron somehow works into break factor.
Paas, you get oddities going in the other direction as well. . .such as the fact that if you re-define the calculation that way, how do you stack two negative bonuses? And why do they not stack the same way as a positive, and why does the math stop working up and down in the same manner?
For example:
Dagger A of a -10 material, shoddily made to -5 quality
vs
Dagger B of a +10 material, well made to +5
Via the "Never degrade a penalty" logic, A would be -15, while B would be 10 + (5/2) = +12. . .
Under the as previously stated logic you get A = -10 + (-5/2) = -12 and B = 10 + (5/2) = +12
When you get into mix-n-match
Dagger C of a -10 material, well made to +5 quality
vs
Dagger D of a +10 material, shoddily made to -5
Via the "Never degrade a penalty" logic, C would be -10 + (5/2) = -8, while D would be 10 + -5 = 5.
While under the previously stated logic you get C = -10 + (5/2) = -8 and D = 10 + (-5/2) = +8.
The benefit of ordering the bonuses by scale, is that the logic goes up and down the same way. . .a -5 material will harm the shoddily made -10 quality work as much as the finely crafted +10 superior work. Similarly +5 material will help -10 crap work as much as it helps +10 skilled crafting.
Penalties don't disappear, and in fact, as fair warning, I gave the most extreme examples I've seen in play. . .but having toyed around with it in multiple iterations, I came upon the method that created the least illogic. . .that a master craftsman/alchemist capable of imparting +20 magical and craft bonuses could craft a bronze blade of -10 material and make a 20 + (20/2) + (-10/4) = +28 dagger out of it. . .doesn't bother me. Hence I made it my house rule.
By the logic that eventually an item maker's crafting skill (or enchanting ability) slowly begin to overshadow the materials they work on. . .first at +10, where +5/-5 materials begin fading into the back, then at +15 where +/-10 fade back. . .goes on and on to the point where masters of +20 are the ones who start going "This steel just isn't doing anything for me, I need to improve it!" on one side, and capable of making seriously nasty, if slightly inferior items of substandard materials. Sometimes my players run into some pre-tech neolithic tribals. . .they've learned not to run off at the mouth at the warrior with a jaguar skin over his head with an obsidian saw blade in place of a sword, or a guy with a sharpened bone dagger. . .all good if they're just ordinary, but if it's an enchanted masterwork of low tech crafts. . .look out . . . .
So the masterwork magic bone dagger is +20 and punches into steel better than a regular steel dagger from the store. . .it's a masterwork created by a high level bone carver, enchanted by a high level shamanic alchemist.
Shrug, YMMV, but I like symmetrical logic that goes up and down the same way, and it's worked out quite well in actual play. . .in the end, if it's fun and works in play. . . .all the parts of it together in one place. . .my house rule would be:
1) Order the bonuses by their scale, not their absolute value:
i.e. +20, -15, +10, -5 would go in that order. . .
2) If values are tied, material goes first, then craftsmanship, then enchantment, then other.
3) The first value is taken at full, the second at 1/2, the third at 1/4, the fourth at 1/8, etc, etc.
4) If for some reason you still have a tie (like three "others"), if all are penalties or all are bonuses, it's moot, if not, penalties go before bonuses.
Who knows, ask me again in a year, I might have changed my mind, but that's the best I've been able to come up with so far. .