I have built User Interfaces before with other games, but I have never dealt with LUA before.

I have decided to attempt a mod for Warhammer, and would like a bit of advice. Basically, will what I have below be able to be done at all?  and if so, what are some ways you would recommend to do this?

Here is what I have come up with, as far as a general chain of events.

create window for user,
SET VARIABLES

user set update time
user set potion/buff type.
user set alert time

LOOP THIS

check what buff user wants
check if buff is active
if buff is not active look for potion in inventory
if potion is available, use it
if potion is unavailable, alert user, change recheck to user set alert.
recheck based on update time

Using items and abilities are not possible from the WAR API, as it would leave to botting and auto-potion addons like the one that you describe. This would give the user an unfair advantage over other players. 

Short answer: no!

You could how ever show the user a waning that the buff have run out and then show a button that the user could click, this should be possible, as it here is the user that presses a button to use a potion. The addon would simply hide/show the button.