There are several different types of rainbow potion but they all look exactly the same.

I will list those that i have found so far:

Luck boost- permanently increases luck by 5

Cure-all- This potion fully heals the user.

Charm drain- permanently lowers charm by 10

I also did some of the item creations that were marked with a ?

Fairy dust + acorn= Druid's staff

Axe + fairy dust= Magic Axe

Chain Mail + Fairy Dust = enchanted chain

Crystal Orb + Diamond Necklace = crystal collar

Crystal collar + Rainbow Crystal = ?

Dry Bones + Studded Leather = ?

Fairy Dust + Leather Armour = elven leather

Gold Necklace + Holy Water = ?
Holy Water + Plate Mail = ?
Holy Water + Halbred = ?
Holy Water + Spear = ?
Negative Necklace + Iron Nails = iron collar
Plate Mail + Fairy Dust = enchanted plate
Rune stone + Ruby Necklace = ?
Silver Ring + Rune Stone = ?
Sword + Gold Ring = dashing blade

Special item
Magic mop: if you work for room and board at the inn you'll eventually get the magic mop which transfers all your cleaning points to weapons when equipped.


Notes:
I will update with rest of the items at some point. Maybe i will give stats of the stuff in the item list at some point too.