All the item quantities need to be rebalanced, but that's not a terribly important issue.
The overall idea is similar to what I've been thinking, but I don't quite agree on the general allocation of items to enchantment effects. It's too focused on trying to give an item a thematically appropriate effect, and not enough on whether the actual effects are nice or if the final pool of possible enchantments looks good as a big picture.
Rather than sockets, how about this:
Placing enhancements reduces the max durability of an item. The value scales up with more/harder enhancements, but it is a fixed number rather than a percentage of total durability. This inherently makes diamond the best material for enhancements, although I never really thought about how to make gold tools useful.