I've been making my own in a pretty similar way. I use a 50-50 mix of parafin (any old candle) and the wax used to seal toilet bowls to the flange in the floor (yes I used a new wax ring). That ring wax is sticky soft and will never harden. That combination gives you a wax that is still soft, not sticky, and you can pull the starter apart to fluff the fiber even when its frozen. Candle wax by itself can get pretty hard.

If you look closely at a cotton ball, it's not really shaped like a ball but a cylinder. Make sure it's oriented up and down when you do this. I dip the cotton ball bottom in the wax for about a nickle sized spot (that was a good description of how much), and set it on a piece of parchment or wax paper that's on a cookie sheet (and forbid, do not just put it on the cookie sheet, the wife will flip). Then with a plastic spatula I squash it straight down. Hold it for a few seconds, and while keeping the pressure down, slide the spatula off. After you do a couple of them you get the hang of it and they look like little cookies. Do a bunch of them and let them cool before popping them off the paper.

They're fairly compact like that, but even better is using your vacuum food saver\sealer and make up some small bags. When you vacuum seal them, they really squash down into little biscuits. Kinda cool because you can make some little 2 or 3 paks that take up very little room in your PSK. When you use them, just peel them apart like a flaky biscuit to fluff the fibers for lighting. They burn great and are hard to blow out.

This is a fun and CHEAP project for the kids or boy or girl scout troop. They'll have fun making them, and then practice using them.

BTW The wax rings for sealing toilet flanges can be found in any hardware store (Home Depot) for about a $1.25. Just get the cheapest one, the more expensive ones have a urethane foam core and\or plastic funnel shaped flange that make them more foolproof for setting the toilet, but waste your money cause you'll just throw that stuff away anyway. It's enough wax to do a couple hundred starters when mixed 50-50. This stuff is really kinda sticky soft, so use a plastic throw away spoon to handle it.

The magnesium chips sound like a great idea.