Here is my experience system idea(mainly aimed at C-dawg to see if he can do it):
Everything you do increases the experience you get.
For example, the more times you swing your sword and actually HIT an enemy with it, you get a specific amount of 'sword experience.' Get a certain amount and you can level up your sword strength. (basically the same thing as getting a new sword)
Same thing goes with the bow/arrow: use the arrows and STRIKE something (can't be misses or you could spam these attack weapons) with the arrow, you get 'arrow experience'. And you level up the strength of your arrows once it reaches a certain amount.
Use your candle, wand, boots and/or lens long enough, you get 'magic experience' and you can physically decide if you want a more powerful candle or more powerful wand, boots that use less magic, or a lens that can see farther, etc. (may be hard to script)
Use your hammer or hookshot enough times, you get 'hammer' and 'hookshot' experience which allows you to do more damage (new hammer) with the hammer and reach farther with the hookshot. (which should start off with a small chain until your 'character' can work with it more.
Finally, instead of HC Pieces, you have experience points. Every enemy is worth 1 xp point with exception of stronger enemies, which are worth 2 and the very rare, 3 xp points. Bosses are worth 4 xp each.
Once the experience has reached a pre-defined number, you get a HC Piece in your menu. And you must do this 4 times to get a full heart for your meter, maxing out at 16 or 24, whichever the quest designer prefers.
So...is this all possible?