I put Bible on the list because it was really cool in Call of Juarez and could be adapted for KC: D. It was more an illustrative point than anything.
But, still, you’re claims aren’t entirely true. A new wave of historiography (mostly from 1990’s, but still producing works today) have re-evaluated certain aspects of popular culture, and found that many more people could read than was previously expected.
In fact, as a Blacksmith, he is more likely to be able to read than most others (besides nobles and clergymen), since he has a craft and could well have been involved in local ‘politics’ (more like communal/village councils). Both of which make him more likely to have some elementary literacy.
As for the expense, that’s also a bit exaggerated. Gutenberg’s press was introduced in 1450, but efficiency had been increasing, and prices decreasing, fairly steadily in the late 14th and early 15th centuries.
Also, we don’t know how the story is going to play out. I think, if we have access to Bard-type skills (charms, speaking skills, etc.), then being able to read would not be too far fetched (you wouldn’t be a very good orator if you don’t know fancy words), so I guess the story will entail some upward social mobility where literacy would no be implausible.