Mostly I just cut cardstock to size and score it to make the card. Envelopes I get from paper companies like ARC in Las Vegas, or I make my own. Sometimes I don't do envelopes, just give the card or attach it to a package.
If you are really into making your own... any size including boxelopes you can look into purchasing a Crafters Companion. You can do absolutely any size and make the matching envelope. It's a nifty gadget tool to own. I love mine... I got the Deluxe kit which included several more plates and helpful DVDs.
Any piece of mail that doesn't fall into a certain range of ratios costs more. In the case of square letters, yes, it's because it has to be processed by hand - addresses are supposed to be written parallel to the longer edge of a mail piece, and with a square envelope the machines can't determine which edge that should be.