(How) can I Create products by the square foot?
There isn't a complete solution, but there's a start and an open issue to make it do exactly what you need. I wrote a Physical Fields module that defines a dimensions field you can use to collect the length and width via a line item field exposed to the Add to Cart form. The issue is the dimensions field right now only supports collecting all three dimensions: length, width, and height. It needs to be updated to support using a subset of the dimensions, and I've just updated the appropriate issue that you can follow here.

Once you have that field on your line item type and have exposed it to the Add to Cart form, customers will be able to specify their dimensions when they add the product to the cart. With this data in fields on the line item, you can then make calculations based on the value of the field using Rules (or a custom Rules action). You can create a new data value by multiplying the length times the width (should be possible in Rules) and then set the product price accordingly. In such a case, I'd probably make the price of the product be the "sq. ft." price and then just multiply that times the square footage I calculate.