Learn Russian: Материал, с которым работает скульптор, очень дорогой. - The material with which the sculptor works is very expensive.

Который acts like an adjective, so it must match the gender and number of the noun it refers back to: Материал (masculine, singular). It takes the Instrumental case because of the preposition с (with). The sculptor works with the material, so in the relative clause, it becomes с которым (with which).

Why is the word order работает скульптор instead of скульптор работает?

In Russian relative clauses, it is very natural and common to put the verb before the subject, especially when the subject is a full noun like скульптор. Saying с которым скульптор работает isn't wrong, but the inverted order flows much better in Russian.

Are the commas around с которым работает скульптор optional?

No, they are strictly required. Unlike English, Russian punctuation rules demand that you always separate a relative clause (a clause starting with words like который or что) from the main sentence with commas on both sides.

How do we know what case дорогой (expensive) should be in?

Дорогой is in the Nominative case because it describes the main subject of the sentence, Материал. If you remove the relative clause in the middle, the core sentence is simply Материал очень дорогой (The material [is] very expensive).