With the exception of being a son of a blacksmith, what you're describing is Wakfu.
First released in 2008, but they were making episodes in 2017, so within your timeframe (the episode you specifically remember was originally aired in France in 2010). Mainly produced in France and the Serbian channel you mentioned did appear to have a fair bit of French animation on it.

The guy in the middle there is Yugo, he seems to fit your description visually and has the power to create transportation portals. He's not the son of a blacksmith.
Far left we have Evangelyne who is an archer who can fire a variety of magical arrows.
Second from left is Sir Percedal. His sword is possessed by a Shushu (think demon) called Rubilax which has possessed him in the past. There are various degrees to which Rubilax transforms Percedal's body:


Here is what Rubilax is like in his own body:

The episode where Percedal meets his old master and defeats a monster (actually a free Rubilax) by 'using his head' is Season 1 Episode 22 titled 'Rubilax'. Description:
Percedal flees to the desert, close to the tomb of his former master,
who is surprisingly still alive.