Will this need heat treatable steel and heat treatment for hardness and durability?
These are to be display pieces only, so they will not be used as hammers. That said, they should be made in a way to prevent rusting because they will be handled.
Are you looking for a cnc shop to machine these?
Not necessarily. They can be made without CNC.
To save on machining cost, could the steel handle part be separate from the hammer head and be welded or brazed on.
That is exactly how these have been made. The weld spots just need to be cleaned up to make it look like one seamless piece.