The following ideas are completely appropriate for the Dungeon Crawl Classics game and were written with that lens in mind, but are similar to my approach with magic items in earlier editions of Dungeons & Dragons and their simulacra. You can find similar ideas in my work in Dragon Roots Magazine for 3rd Edition, and in Petty Gods or The Dungeon of Crows for other OSR-type games. D120 Treasures also contains (unsurprisingly) some items with a similar philosophy of design.
Design Principle 1: Magic can do anything. It doesn’t matter what your system of choice allows or does not allow. Magic can break the rules. In fact, arguably, that is the thing that makes it magic. Now, you know and I know that there are games where, when a magic item is introduced, the GM is expected to know what the PCs would need to recreate it. Perhaps a combination of feats and spells. Perhaps something different. This is a straight jacket on what magic can be, and you should ignore it. If you want to include a magic bird bath that attracts avian creatures, go for it! Likewise, if you want to include a ring with a weird power no spell can match, you do not need to know what was required to create it. Perhaps the gods don’t even know. Or, if they do know, perhaps the gods work to keep that knowledge from mortals. You don’t have to justify it.
Design Principle 2: Follow a theme. Even though magic can do anything, it is all the better if the item in question follows some form of theme both in form and function. My answer to the wand of wonder, for instance, not only creates random affects, but has a random appearance whenever you look at it. If you decide to make a powerful necromantic item look like a child’s stuffed bear, you may wish to make its powers linked to children or childhood in some significant way. The players should experience a frisson with your item; it should feel right. A wish from an angel should not feel like a wish granted by a demon.
Design Principle 3: Use the mechanics. Expressing a magic item into game terms requires engaging with the mechanics of the game, however obliquely. Consider how to put whatever it is into game terms, even if it is to say “the angel will not grant selfish wishes, but will grant selfish wishes in the best possible way”, you need to know how it will play out at the table. If your game has Luck checks, corruption, patron taint, mercurial magic, or similar effects, feel free to use them when designing magic items. For that matter, consider designing items that affect those systems. A ring that changes your mercurial magic effects to one of 20 frost-themed effects would be cool. So would a portrait that assumes your corruption for you until, one day, it has had too much and comes out of the frame….
Design Principle 4: You can steal mechanics from other games. If your game doesn’t have feats, for instance, you can have an enchanted earring that allows its wearer to gain the effects of a feat. You can be blatant about that or disguise that as you wish. And you don’t need to limit this to other d20-based fantasy games, either. The item might offer a Gamma World mutation, so long as you can express that mutation in the mechanics of the game you are playing.
Design Principle 5: Limited Use Items are Cool. Potions, scrolls, a hunk of magic cheese, a globe that must be broken to release its power, a glass sword that shatters on a fumble. All of these can have cool powers, with the interesting choice for the players being “When do I use this?” If you want the choice to actually be interesting, make sure there is some way that the players can figure out what the item does before using it! Which leads to….
Design Principle 6: Magic cannot solve all of your problems. No matter how powerful an item is, it has limitations. Those limitations might be that they are single-use or have a set (or random, as for instance with the glass sword example) number of uses available. It may be because the item is only usable under specific conditions (at night, under the full moon, when the user is undressed, on a beach, etc.) – avoid easily met conditions like “in a dungeon” here! It could be because the item weighs several hundred pounds and is difficult to carry around. It could also be because using the item offers a significant drawback. This in turn leads to....
Design Principle 7: With Great Power Comes Massive Drawbacks. You can do this wonderful thing, but every time you do, you suffer corruption. At first it is minor corruption, but the type of corruption has a chance to grow with each use. The sword offers you power, but it offers the same to everyone around you, on the off chance that one of them might take it off of your corpse. The ring does some neat things, but if you die while wearing it you will return as a vampire to plague your friends. Every time you use the staff it permanently removes one (or more!) of your hit points. The item demands sacrifice to operate; the greater the powers, the larger the sacrifice. Suddenly the question is not “How do I use this?” but “When should I use this?” or even “Should I use this at all?” If you get the balance right, the temptation to use the item, and the reluctance to use it, should almost balance out, so that the players are always faced with an interesting dilemma.
That isn’t all that goes into designing a magic item, of course, but 7 is a thematically potent number when discussing magic. I hope that these principles are of some help!