Well TES have free-form alchemy, enchanting and spellmaking
Eh, it's not really the same thing. Since all of those are just a small, set number of textures & effects (all fireballs are the same, all lightning bolts are the same, all potion bottles are the same, all enchantments are the same tinted saran-wrap shimmer), with some numbers moved around. Nothing really to them. (Plus, not free-form - they follow the set modules the game gives you. Alchemy - two "Restore Health" plants gives you a Restore Health potion. Fireball doesn't change, you just set it's damage/radius/duration.)
Whacking on a pile of iron, and shaping it into some varied sword shape (needs a texture, needs a 3D mesh) would be different. Doing it like Oblivion would just be a variant on "recipe". You set some variables (type of weapon; which metal, which coal, which gem = durability, damage, weight settings) and it hands you one of the preset "sword" model, with your chosen numbers.
Except that it's not. It's placing items in the right position.
Not really, it's pretty much a recipe. The recipe for "torch" is coal-over-stick. There's a set number of craftable items in the game, and you have to follow the expected patterns (recipes) to make them. You can't just throw some ore & wood in there in some other pattern and get something out of it.