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?