Is it possible to make money by buying ores and smelting them into bars or is it better just to go out and dig the stuff yourself?

Just check the going prices on AH. Everytime Ive check the oars seem to be going for as much as the bars themselves.

pricing gose by server. on my server (Arathor) the ore costs more then the bars. people know that high lvs looking for power level don't mind droping a few gold to get ore and level minning just off smelting.

You just have to keep yer eyes open. Last week I saw mithril ore was going for 14g - 19g per stack and the mithril bars were going for 23g per stack. Obviously I took advantage of the situation, bought out all the ore, smelted it and made myself quite a handsome profit with just about 5 min work. Since then the price of the ore has gone up to about 21g so it is not worth doing, but I am always keeping my eyes open.