Reddit mentions of Milescraft 1097 ToolStand - Drill Press Stand (compatible with Dremel),Black

What's your budget for tools? This whole thing could be hand-carved using a couple of x-acto knives. It'd be a lot easier if you had a stabilized drill or drill press, like a Dremel and an inexpensive press. Also useful for this sort of work would be a small, flat, metal engineer's ruler.

A solid work surface with holes and movable dowels can go a long way towards stabilizing your work pieces. Small clamps would certainly help, though use foam rubber in the jaws to avoid marking up the wood.

Check out Micro-Mark's tools. They're mostly quite expensive, but they give you ideas of how you can hold and manipulate small pieces. They do have some affordable stuff.

I prefer an aliphatic resin adhesive to cyanoacrylate (super glue) for wood. I use Titebond and a wet rag to clean up. (Seriously, it's easier to clean up wet than dry. Get a wet rag.)

It'd be a lot easier if the photographs weren't completely out of focus.

Get some scrap pieces of various woods and a couple of cheap carving tools. Spend some time carving shapes. That'll give you a feel for what needs to be done, and how different woods are to work. Pine is very soft. Maple is harder; good for wooden spoons and stuff. Ash is a lighter, hard wood. As Na4 says, basswood is a common choice carving small boxes.

If you live in a big city, there is likely a specialty wood shop (in Boston, Rockler,) that'll sell "pen blanks" of many exotic woods. These won't cost too much. These are small slabs often used to turn (carve on on a lathe) pen bodies, but they're also good for small carving projects.

When you glue flat pieces together, use a light coat of glue on each surface and clamp tightly. Glue should ooze out of the sides. Clean with a wet rag. You want to minimize the seam when dry. Be careful to keep glue away from the insides of the joints/moving pieces.

I dunno, sometimes I prefer to just pay the thirty bucks

Highly recommend some milling bits (find some that fit the collet your dremel has, don't get a chuck) and a dremel stand as well. I have one of these and it makes this carving out shells even easier.

Personally, I'd love a full size mill but I don't think I can fit one in my small 1 bed apartment =)

The bare minimum setup from my perspective would be:

• A vice (or something else to hold the blanks) and a handsaw with a small kerf. Maybe a dovetail saw or something. This will let you cut the premade blanks to length. You won't really be able to make your own blanks easily without a bandsaw
  
• Then you have to drill out your blanks. If you don't have room for a drill press, you might be able to get away with hand drilling them. I did it for a while, but you either have to be very good, or use a larger blank (I was the later). Otherwise, maybe a hand drill drill press setup? And some good drill bits. The sizes depend on the kits you buy.
  
• Gluing in the tubes to the blank doesn't take any special tools.
  
• A Pen mill (aka barrel trimmer) works ok in a hand drill as well. This is required to trim the end of the glued up blanks. Again, sizes depend on the kits.
  
• For a lathe, if you're really tight on space, the Taig lathes are pretty good.
  
• You'll need a couple turning tools. Maybe a bowl gouge and a parting tool? Don't go too high end to start with.
  
• You can use the above vice above as a pen press, which you need to put your pens together.
  
• Sand paper from 300 down to 800 grit. Some people use sanding pads as well down to 12,000 grit.
  
• Paper towel and CA glue to finish.
  
  That's about the bare minimum I think. I'm not endorsing any of the brands I linked to here. They're just in there for reference. The lack of a drill press would probably cause you the most problems, but you'll survive ;)
  
  I hope that helps!