Just to clarify: At 20th level, the character gets 10 Craft Points. You see an issue with the idea that he could break down 3 Rare items, which would give him an extra 6 Craft Points, and then spend his 16 Craft Points to make 4 Rare items. (I assume that you had a typo.)
At 20th level, I don't see a problem with this at all. It would take 3 days to break down those items, then 4 weeks and a lot of money to make new ones. Rare items are also level 7. He's level 20. If these are just upgrades from +1 to +2, then there are probably a lot better things that he could be doing. Honestly, I would see this more as the time when the characters truly cobble together what they have, decide what they no longer need, then give the Artificer the resources to drain a bunch of weak items so that he can maybe knock out a Legendary item in a month or so before the stars align and the Gates of Doom open up on that nice hamlet all of the characters were born in. Or something.
It's also worth keeping in mind that, like I said, anything other than basic bonuses should require something more. Some sort of quest or special item or something. Unless it's Eberron, the Artificer probably isn't just picking up ore, hitting with a hammer for a week, then handing the characters their requested Dragonbane Greatsword.
I think that I agree with you on Imbue Armor, though. The resistance should be activated and last for a minute, but I don't know if it should be chosen at the time it's Imbued, at the time it's activated, or if it's Reactive, meaning that it automatically turns on when the wearer would be damaged by something and make him resistant to that type of damage.