IMO a blacksmith service giving 3 LP would very elegantly balance itself. Due to the increased utility, the price would rise and more money would be spent on the auction (= goldsink). The price of +3 junk items would rise too, slightly increasing the transaction volume and the total marketplace tax money being spent. Although of course after a craze period, the increasing cost of the blacksmith auction will keep those prices from increasing much.
I think doing this could bump the price of the blacksmith to around 400k quite easily.