The armor was developed and produced by Andrew Ainsworth, a prop maker who up to that point had built his career on constructing things like kayaks and fish ponds.
The armor was originally made out of HDPE (High Density Polyethylene) using a vacuum forming process - the same process he used for his fish ponds. After making 50 or so helmets, he upgraded to a more durable ABS plastic.
A look at the original HDPE helmets:
There's actually a huge amount of information about his meetings with George Lucas, why he built the armor the way he did, and a little about the legal case against him on Andrew Ainsworth's website, originalstormtrooper.com. A really interesting read.
According to bbc.com,
The young designer was paid £20 per helmet and £385 per armour - objects he sells today for around £500 and £1,000 respectively.
Ainsworth threw the stormtrooper armor molds away after getting out of the film business in the 80s to save space but kept the helmet molds in storage. There's no real legal reason he sat on them for so long, he just sort of rediscovered them in 2002 when struggling to pay school fees and decided to dust them off to start selling.
He was sued, however, by LucasFilm in 2004 after selling only 19 helmets, lost the case in the US but won a victory in the UK that allows him to continue to sell them. I remember reading some stories in January that talked about him finally paying off his legal fees and working for himself for profit again. It's a neat story.