Your combination idea is a good one, but there should be a bit more variety then 'common item' and 'not so common item'. There should be a bit of variety, and the more common ingredients might be needed in bulk. So say you need one golden salve for your spine healing junk, but you'd need 20+ quarry bush paste or whatever other item needs to be combined. Also, it would be nice if these things would stack with magical healing to be able to do just about anything short of raising the dead, i.e. restoring lost limbs and such. This should require insane amounts of skill both in mundane and magical abilities, though.
I kept it vague just to illustrate concept. When dealing with frequency issues you really need a pyramid structure (IE 4x Common, 3x Uncommon, 2x Rare, 1x Very Rare) otherwise common = unlimited supply and the only thing that matters is the rare stuff. The combinations of drugs available would then be highly location dependant. Perhaps our fort has ready access to drugs to treat poisions and bleeding, but we lack the one uncommon plant needed in all recipes to mend bones. Since it is uncommon...we might be able to trade for some, but it will be expensive.
The recipes themselves would not be universally known either. They would have to be traded for (under the ....drum roll.... recipes entry on the trade screen).
I included the limits I'd like to see (except I forgot to put in a stop bleeding)...I think resurrection and organ/limb regeneration should not be possible. A blind dwarf should stay a blind dwarf. Urist "Lefty" McMaimed will just have to choose to carry a shield OR an ax. (this btw is key for the Powergoal mentioning a prosthetic arm).
Anything greater belongs in the magic arc.
As far as removing conditions/wounds, I think the process should be that a caregiver should give the proper tincture to a wounded dwarf once in a given recovery cycle. For instance, if a yellow wound checks for healing at season change (or X days), the dwarf gets a dose every season (or every X days). The medication increases the chance the wound will heal. This mirrors the current system I think.
This of course assumes that you, the benevolent mountain god, have ordered the production of a sufficient stock of said tinctures.