"In selling a good or service, where labor and materials produce the end result, who determines the value of said labor (ie. my labor to create or produce the end product) ? This is VERY important in addressing the potential for a business or hobby model. "
That's the free market, right? It's all pretty much intangible. I can sit two people down in front of a blank canvas with some paint. One person (my grandmother) paints a picture that's nice but probably only worth $20 in a thrift store. Another person (let's imagine the son of a famous politician) can sell their painting for $500,000 to an anonymous foreign not-at-all-shady buyer. It's mostly intangible.
Or, avoiding sarcasm, I bought a small wooden table at a craft fair that certainly cost more than the cost of the raw wood. The seller sets his price based on perceived value, what others are charging, and ultimately, whatever the market will pay. If his prices are too high, he goes home at the end of the craft fair with a full load of unsold goods. Put another way, if it takes 10 hours to make a table but the market will only pay $50, then the market is setting the value of his labor at $5/hr, and he either accepts that, or he finds something more profitable to sell.
You seem to have changed from selling garage sale type items to selling some kind of handicraft or product. From an income tax point of view, if you sell for more than the cost of your materials, that's taxable income. It is not relevant to know how much of that income came from your time and how much came from other market intangibles. And you can't "give away" the materials and only charge for labor. Your taxable income is the difference between your selling price and your cost of materials and that's that.
Then, whether it is a business or hobby would be determined in the ways described above, and you go on from there.
