So is the blacksmith the one attacking, and if so, why, or is he being attacked? I've always thought of them as being rather peaceful folk, who stood under a spreading chestnut tree, with arms like iron bands.

No, he's being attacked by the Dragon knight.. They're the 'bad guys' in this iteration of Castle/Kingdoms.

I just bought this set over the weekend. I do love the playability of the hammer. However the weapon rack in my opinion is sorta lame. They are suppose to be for display i guess because they all have a little nub to fight inside the cone where the axe is in the picture. The bow is terrible. The mace and the hook looking thing i believe are suppose to be wands or something like that. The hook is actually a crescent moon. If you look at the bottom of each you will notice there is a gap between the hand and the bottom. I am debating cutting this off so it does look more like a mace for the spherical one and the moon one is just a waste of plastic imo

I think the Heroica weapons are irritating. The blacksmith is obviously the evil one(every time LEGO makes a set with 'attack' in the name the evil guy is the one attacking) other than that it's cool!