How on earth do I create bran new weapons and armor like the LotR swords or the dragon bone weapon set? Do I need a different program or were they made in CK?

New meshes are made using a 3D tool, like 3DS Max, or Blender.
You cannot make new meshes in the CK.

Wow 3DS Max is too costly, Blender is free right? Is it any good?

I dunno, I dont have the time to learn its use. Lots of people use it, probably because it is free.

If you have no experience, like me, it could take a while to get near the skill level required to make a brand new sword. I would recommend looking at some tutorials online and maybe edit an existing sword and add it ingame until you get good enough.