I greet thee, fellow planewalker. My name is Mashera Silveryglide of Arvandor, and I am glad to be able to present some dark mysteries to you. Those sinister beings called fiends, denizens of the planes of misunderstanding, wasted emotions and unnecessary despair, are surely the greatest threat to multiversal harmony. Perceiving all of existence as through a broken mirror, they only seek to destroy and to control. Unfortunately, these ill souls always seek new and more devastating ways to achieve their goals. One path constantly used is the creation of artifacts. Having only few real spellcasters among their ranks, the fiends have found different routes to empower objects with magical might; the best known method is the destruction and reformation of captured spirits.
I want to present here the way the emotion-freezing baatezu use for this in general. Although this is not the path most efficiently exploiting the spirits for the artifacts (nor the most horrible way), it is the one best structured - and thus most easy to understand.
Who in the baatezu hierarchy does have access to captured spirits? The least among these fiends, the nupperibo and lemure, are far too mindless and weak, of course; although of average intelligence, the spinagons still only serve.
The rank of the abishai is the first to get access to souls for their own needs. They have to make an application for it, in which they have to state their business. As a plan involving the destruction of souls usually isn't something allowed to someone as low as an abishai, these fiends have to find ways to overcome their superior's doubts. The most usual way is lying about the business; a plan that involves the souls without destroying them is stated. For having a perfect record, the fiend of course fulfills this plan, as well; but before he has to deliver the souls back, he uses (and thus destroys) them for the artifact planned.
If the experiment fails, the fiend can be sure of a demotion; if it is successful, he still has to find a way to get a back-dating permission for the experiment from a higher baatezu. This is usually achieved through diplomacy; a superior who would have an advantage from the successful experiment is asked for the permission, and if he grants it, both the abishai's and his superior's name appear in the records of this successful plan.
The process is similar for the barbazu, although these unintelligent fiends very, very rarely create anything but misery (those who do probably are about to be promoted - or to be severely punished). The other lesser baatezu, erinyes, hamatula and osyluth (the kocrachon being a special case explained later), have better chances of being granted souls even for permanent destruction, at least for the special duties they have. If their plans are unusual or require a particularly high amount of souls, they again have to find other methods of achieving their goals.
The kocrachon, baatorian torturers and masters in their twisted "art", are usually allowed to create about any low-power magical item if they can find a way to explain how it serves to torture their victims (and they are very creative with this). Also, they are very often able to directly use their torture victims in the creation of magical items, using their prey's souls to both empower the item and torture the pitiful beings. This leads to the fact that the kocrachon creations are among the most unusual of all baatorian artifacts, sometimes using even the souls of celestials for some horribly dark cause.
The greater baatezu are freer in their experiments. The amnizu, though, rarely use this freedom, for they know most other baatezu don't trust them too much, and because they prefer to keep their plans away from official records (which is nearly impossible when creating artifacts). If they would make an application for souls, they would sooner or later have to explain what it is for, and the pit fiends (which seem to often have a personal hatred for them) tend to use this against the amnizu.
Cornugons and gelugons are the first among the baatezu to be able to create even more powerful items without too much trouble. They have the rank and the experience to get permission for the destruction of many souls, and they might even get the permission to leave for a special mission to capture the most befitting souls for the artifact.
Of course, pit fiends are a special case again. These unbelievably powerful embodiments of cold evil do not even ask anymore if they want to create an artifact - they just do it. Given their power to cast a wish once a year, they often do not even need souls anymore to procreate a magical item, although they often use them either for extra empowerment, or to spare their wish power for moments where they need it more.
So, how do baatezu create magical items by destroying souls? I have two different theories on it; or rather, one theory with two different key elements. The power of the souls is not used directly (except maybe by the knowledgeable pit fiends as well as the kocrachons - see below). Instead, it is used to "bribe" some higher power to infuse the item in question with magic. This is where I am not sure about:
The soul is either merged with the plane, which in return gives out a lesser amount of "planar energy" to empower the artifact. The plane wins because it gets more than it gives, and the fiend wins because it gets the particular kind of power it wants. Or the soul is sacrificed to one of the Lords of the Nine, who then empowers the item in question with spell power similar as a deity granting a priest spell. With this deal, both the Lord and the fiend again gain what they long for.
Although I do not know which of the above methods is true (maybe even both), I can tell there is another way, which is most often used by the kocrachons. This path traps the soul of a captured being inside the artifact to empower it. Similar to the power of shadow fiends, the soul is sucked into the object; instead of simply being trapped there, though, a particular magical trick transforms the thoughts and emotions of the ill-fated victim into a particular form of magical energy. These items either have only weak powers (so that the soul inside "regenerates" the energy exploited from it) or does have a limited amount of uses only - after which the soul is utterly and irreversibly destroyed. Of course, the more powerful a particular soul is, the greater the effect can be. I believe that a Solar could provide enough "spirit energy" to empower the whole Baatorian race with new abilities... but I am happy to say I am convinced the baatezu will never be able to capture one of these ascended beings.
A twist of the above method traps the soul into a kind of "storage container", which is then linked with various minor magical items. These items have no other innate powers than to channel the incoming energy from said container; the fiendish advantage of this trick is that with a few souls, you can create a greater number of items. For example, I have seen a group of erinyes (who probably served the creator of their items) owning unholy medallions which had the ability to turn paladins and celestials, just as priests turn undead.
It is hard to give set amounts of souls needed to create particular items. This highly depends on the "quality" of those souls, as well as on the particular method and goal of item creation. I think that a baatezu should be able to create a normal sword+1 with about hundred souls; a pit fiend could create a lawful evil weapon with the powers of a barbazu by trapping the living soul of one barbazu inside (a kocrachon would probably need more than one barbazu, as it doesn't know all the intricate details of item creation). In general, a magical effect needs nine times the amount of larvae as the spell level of this effect is; if it is meant to be permanent instead of a very temporary or one-shot effect, this number can be multiplied by nine again.
During my researches, I have come upon one fact that made me wonder. The kocrachons, learning so much about the creation of magical items, use nearly nothing of this knowledge when being promoted to a higher rank. It seems they either forget this particular knowledge, or have some reason of not using it anymore. Unfortunately, I was unable to find any further clues about this; I am sure, though, that an important secret of the baatezu is hidden with the answer to this question...