yes you can but you have to talk to the king in lummy castle 1st then go to wizards castle (use your map to find) and give the talisman to the wizard whom the king told you to go to. Then the wizard will give you instructions on how to make a talisman.
The above answer is incorrect. It was directed at the "Rune Mysteries" quest. You can't make your own Talismans. There may be certain NPC's that can help you get them such as some in the Rc'ing guild. But no, you cannot make your own.
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Bring a water talisman, a plain tiara then go to the water altar, and use the tiara on it, you will lose the water talisman, but you will obtain a water tiara.
To make a mind tiara, take a normal tiara and a mind talisman to the mind altar.
kill things like goblins or jsut buy it
Yes, the only talisman shop that sells them is located in the runecrafting guild. Although they do not sell blood. You buy them with guild tokens obtained from the mini-game there.
If you make one(get one), it acts as a talisman of air. It is wearable. When you are wearing this item, you can simply right click on the air altar and select ENTER.