Powering nichrome, possible to do it with AC?
You could certainly power any resistive element with AC, just use its RMS value as the equivalent value of DC. 

The problem with step-up transformers is another: assuming you need a constant power to heat up your resistive element to the right temperature, lowering the current means to step up the voltage, which means more risks if you reach the order of tens of volts: 20Vrms may be deemed marginally safe (at least for the operator), 60Vrms are not (without proper insulation and earthing). Anyway always use a properly insulated transformer, i.e. one that has the secondary insulated from the primary (no autotransformers, i.e. inductive voltage dividers). And any exposed metal part should be earthed correctly to avoid hazards in case of failure (e.g. the mains live wire is shorted to the metal chassis/frame of the device). 

Note that higher voltages may also cause other problems if the material you are going to melt is somewhat conductive and comes in contact with a live wire (i.e. the pen tip is not electrically insulated), since part of the current may flow in the material (I don't know much about the wax you'll be using). Anyway I'd go for lower voltages and higher currents.

BTW, if you are in the order of 10 watts probably you won't have efficiency problems on your mains lines. At 240V this means less than 50mA, which shouldn't cause too much loss on your lines.