What is the best practice for creating an Item for custom orders? Meaning, we have customers wanting us to create a one-off solution and we don't want to create a one-off Item for that order. Do we create a Non-Inventory Item and have a Special Order created with the line items that would be used to fulfill the order?

I would create a generic non-inventory item and use the description to describe the custom details. If you mark it as special order, it will generate the PO. Is that what you want?

The primary reason is for "hiding" the details from the customer while enabling the back office to know all the line items that need to get fulfilled

A generic non-inventory item can solve your problem. Mark it as special order and add the details in the PO. You can also have a custom field on the SO lines for the custom description. Then source the description on the PO from this custom field. I am not sure if this is a best practice, but I would follow this.