Herin are a number of ways your magic item might come into being, apart from something you order from your local wizard.
A standard roleplaying environment: the tavern. This is another easy one to create in your own home, providing you have a large enough group of roleplaying friends. Let us assume your PC group is no larger than five, and that the rest of your friends can be NPCs. Let us also aim for an exceptionally seedy and unscrupulous city tavern.
In a good LARP it is desirable to separate the players out individually at some stage, because they are more suggestible and afraid when they are alone. Some form of individual challenge is probably the best way of doing this. One possible setting for this is a cave system, and it is probably one of the easiest to recreate realistically, and one of the most perfect for playing on fears of claustrophobia and darkness.
The monarch used to have absolute powers until the disappearance of King Henry V. A "temporary" replacement was put on the throne to hold it until King Henry returned, and he would have only one vote on the governing council of nobles and no other powers except persuasion. More then 50 years have passed since then and everyone knows King Henry is almost certainly dead-but the nobles don't want to go back under the rule of an absolute monarch, so the kingship is only "temporary" until King Henry V returns to take back his throne.