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My husband can speak to the blacksmith, but he has all his stuff still bundled into duffle bags, and there is no "Craft" option. He's level 9. I'm also level 9, and I've been able to speak to the blacksmith and use the smithy for some time. My other characters similarly have had no trouble.

Right now, our game is at "The Shattered Crown" quest stage.

Is there someone else he needs to speak with, or some sort of event that must be triggered to have the smith set up shop?

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up vote 3 down vote accepted

Once you have unlocked the blacksmith and jeweler on one character you can use them on all your characters at all stages of the game (even before you normally would be able to otherwise).

To unlock the blacksmith you must complete A Shattered Crown (lore and possible spoilers at that link).

After returning the crown, he confesses he wants his life to have some meaning and your character suggests that he craft items for your use.

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