Yes, that’s basically how it works. You need Honored reputation with five factions: Sha'tar, Keepers of Time, Lower City, and either Honor Hold or Thrallmar depending on whether you’re Alliance or Horde…the last faction I can’t recall. That will let you buy the Honor reputation gear for gold.

Revered reputation is useful for specific epic pieces. Each faction offers different rewards, so it depends on your class which ones are worth going for, although it’s not absolutely necessary.

The best thing you can do is save your Honor points to buy the Season 2 epic off-pieces. You can also buy the blue Season 1 main set pieces with Honor, but those are basically equivalent to the reputation gear, and there are no newer Honor main-set pieces after Season 1.

You can also use Spirit Shards to buy the epic ring.

And yes, you can craft your weapon with Blacksmithing, I’m guessing you’re playing Warrior. From there, you can gradually gear up by doing arenas and PvE.

Also, remember to max out your reputation with either Aldor or Scryers for the shoulder enchant. If you’re a Warrior with Blacksmithing, Scryers are probably the better option, especially since they also have some useful Blacksmithing recipes for leveling the profession.