Is it possible to make a neat item that is pretty powerful, but give it like...a .05 percent chance to appear in a chest? I know this is a pretty terrible game mechanic, but it'd be a neat thing to have to spice up the all the dungeon delving I do.

Yes, just create a levelled list with the item in and set the 'Chance None' Toggle to an appropriate value; I don't know whether it takes double arguments but you should at least get a minimum chance of 1% by setting Chance None to 99. Then place the levelled item into a container as appropriate.