Of course you want your blog in your sitemap.
If you post regularly, there will be lotsa googly good content there.
Site is looking great, btw. And you did a pretty good job of integrating the blog!
As to what you blog about, I look in my stats, find the keyphrases that people use to find me, and use them as a kicking off point for creating articles about what I'm doing. That will create pages that are optimized for certain keyphrases.
Also, since you don't yet have much in your blog, you might consider changing the permalinks so you get googly goodness within your urls. Try /%category%/%postname% which will give you an url that looks like this: alteredwood.com/blog/woodworking/new-items
Do this permalink change before you add a sitemap. There is a sitemap plugin for wordpress that can do that portion of the site.
Make sure you use your chosen keywords and keyphrases in your blogpost titles. For instance, I may have chosen a title such as "New Items for Christmas Gifts, Handmade Wood Jewelry Boxes" instead of just "New Items".
You can write about general woodworking topics as well. I have friends who do a lot of woodturning and they're always buying from each other, so you might actually get a few sales out of those posts!
Sitemap and Blog
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