I've been playing around with it, and it seems not quite worth the time it takes to save and load until I get a desirable enchantment, but maybe I just need better levels. My sorcerer is level 12 and has 22 intelligence. As an experiment, I tried enchanting a helm 20 times, loading after each success, and noting the results. What I got was:
10 failures
5 leather helms
1 brass helm
1 coral helm
1 iron helm
1 lapis helm
1 silver helm

Coincidentally, the last attempt resulted in the silver helm. I'm keeping it.

So, what determines the item quality you get? Pure luck? Levels? And if levels, what do levels actually do? Does it determine the worst possible outcome? Best possible outcome?

I never used Enchant Item in the older M&M games, but in MM6 thru MM8 the results are random so I expect the same thing for the older games. You'll likely get better mileage out of Recharge Item than Enchant Item.

Thanks. But I'm just wondering, why so many failures that do nothing? Or is an unmodified item considered level 1? If that's the case, shouldn't only 6-7 of the attempts give bad results, and not 16? Either I don't quite understand the low level behavior, or my luck is unusually bad.

10/20 is close enough to 7/20 that would say it's just a statistical anomaly. Just bad luck. Real luck, I mean, the kind where you flip a coin 3 times and they all come up heads, not the in game kind of luck. In game luck has nothing to do with it.

It's a good idea to gain temporary level boosts before enchanting items and having the highest level party members use the scrolls you find.
In WoX this spell is not very powerful, you'll definitely find better items than you can get with it. It's main benefit is getting more money for the unenchanted items you find, a normal plate armor is worth 2,000 GP while an amber plate armor is worth 60,000 GP for example.

But what about the 6 leather and brass enchantments that are actually *worse* than no enchantment at all? Those wouldn't be considered a level 2 item, or would they?

The one thing I don't know is the random item creation algorithm. It's entirely possible that, while they are worse, they cost more, therefore they're a level 2. Maybe I'll figure it out one day.

I guess everything with a crystal enchantment or worse is considered the same equipment level, still a level higher than unenchanted.

Ok, I think I'm starting to understand why this spell sucks. It can't produce anything better than platinum. Ever. But by the time you have a real chance of producing platinum, you're already swimming in platinum and jewels.

Yes, but as kmonster said, it can still be used to make items more valuable before you sell them. Money is actually very important in World of Xeen because training to the higher levels gets very expensive.

Like Waltorious says, enchantments are a good way to make money, especially later in the game. It's not impossible to get better than platinum, either - last time I played, I got a fair few emeralds and rubies and even an obsidian or two. That was in the final hours of the game, though.

By the end of the game, you can easily bankrupt yourself and still not train as many levels as you're eligible for. You don't have to train all those levels, though.

There are different methods for making money floating around the net, but near the end of the game, I like to hit the shops for expensive armor, enchant it, sell it back at a profit (make sure you have the Merchant skill), stash the gold in the bank to earn interest, then hit the laborer's union to work for a week so that the shops restock.

This is an important point. One thing I like about World of Xeen is that finishing the base game is not overly difficult, but there are many optional things to do for a real challenge. You will only need to amass huge amounts of gold for the highest level training if you're planning on tackling some of these tougher, optional bits. For the base game, once you are unable to afford more training, you're probably ready for the end.

Well, I do intend to tackle all the optional things. Currently my characters are levels 35-38, I've got 2.7 million in the bank, and everyone is 26 years old.

So far there are only two areas I have on my todo list (for being too hard). The Dragon Cave, which I haven't attempted since defeating Lord Xeen and entering Darkside, and A1, which I last tried about ten levels ago.

The toughest area I have completed would be Northern Tower, which wasn't all that hard with Day of Protection and Power Shield.

At level 35, you'll likely find Clouds pretty easy, at least until you venture over to Darkside and find some lost keys. There are locations in Clouds that can't be entered without items from Darkside and vice versa. That's where the real challenge is.
Good luck :D