The disappearing stone knife when you try to craft it is linked to the current animation bug (i.e the same as splints/skinning animals).

If you take the stone to hands, then F11 to start the suicide animation, then craft the knife while the animation of bringing fingers to head. This method crafts a knife everytime, if you don't do it this way then there is a good chance you get a message saying you crafted knife but it's no where to be seen.

Happened to me and my friend last night, the player doing the hack was also teleporting (i.e they would appear for 1 second, you would drop your weapon, then would disappear and reappear somewhere else)

Happened to me and friend last night, exactly the same. The hacker was teleporting and we dropped what ever weapon was in our hands.

Also this is same as 0017730 (if it helps you guys to merge bug reports)