In a recent issue of Tools of the Trade Jeff Kolle wrote a story about Brent Bailey, a blacksmith who claims to have made close to 17,000 hammers at his forge in Orland, California. The videos below show Bailey in action.
The first was shot at his forge in Orland, and shows how the hole (eye) for the handle is made. He could have used a power hammer to drive the slitting chisel through the piece of steel that will become the head but instead he does it by hand.  (video showing the handwork process)