Reforging allows you to exchange 40% of an item’s stat value to some other stat - on 3.3.5 patch.
You can use any item in your bags as source of display, as long as it fits the requirements.
The system is dynamicly using all items - custom items work by default.
The changed stats of an item can be shown on item tooltips, however due to the game’s limitations all items of same entry share the changes.
The system is designed to be blizzlike otherwise.