The intermediate Wood item serves no purpose and should be removed to reduce needless clutter/complexity.

There are 4 items in the game which use wood as a crafting ingredient: Wooden Box, Small Electric Pole, Shotgun, Combat Shotgun. All of these require converting 'Raw Wood' into 'Wood', and then ...

I'm not sure which method for fixing this is the best, but I will note that this is probably the only thing in the game that still feels "wrong" or broken that I noticed the first time I played and is still in the game now. It's annoying at best and actively confusing for new players at worst.