Good point about the rich. Even now, a hand-painted painting by the original artist costs way more than even an extremely good copy made by a hired painter with great skill, which costs more than signed limited-edition reproductions, which cost more than unsigned reproductions. We only need a few zillionaires who value original art to keep a number of people employed as painters.

I suspect in the real world, production will tend to distribute across people in such a way that any system with more production will tend to have a higher amount of stuff owned by even its poorest, no matter how good the machines. If a trivial picture of capitalism puts all of a tremendous amount of wealth in a minority's hands, that minority will have to be willing to slaughter viciously parts of the marjority to "protect" its property rights. If you are that rich, why would you be willing to do something so distasteful? Better to just let things get reorganized and only have a tenth or a hundredth of the zillions of dollars you theoretically would have had under the old organization.

Some people value "hand made" things, so there will be some market.

I would use machines to help me make those "hand made" things faster. Seriously, even with laws, some use of machines would be allowed; I just need to find a way to use it to maximize my total productivity. For example, even if the product must be done by my own hands, is it OK if a machine guides my hands, provided that the machine parts will not touch the product? I could watch some movie while the machine moves my hands to do the work.