Thanks, all! This is great. I did not expect font handling to be so easy. Yes I was trying texfont.pl, the scary perl script.

One thing I found suspicious: I tried to find out whether OSFONTSDIR supports several ':' separated directories (on Mac OS, there is /Library/Fonts and ~/Library/Fonts), by setting  OSFONTSDIR and rerunning luatools --generate. However, I did not see a change in the numbers of indexed files.

In any case, after settings fonts up and compiling (texexec --luatex traditional_arabic-test.tex), my font is not found currently...

Here is what I did, in detail

> export OSFONTSDIR=/Users/buraq/Library/Fonts
> ls $OSFONTSDIR/arabtype.ttf
/Users/buraq/Library/Fonts/arabtype.ttf
> luatools --generate
> mtxrun --script font --reload
> texexec --luatex traditional_arabic-test.tex
...
define font | font with name arabtype is not found
define font | unknown font arabtype, loading aborted
! Font \TradArabic=arabtype*test2 at 28pt not loadable: metric data not found or bad.

Is there an easy way to find out which fonts are known to the system? (after luatools --generate)

Here are the relevant source lines (slightly changed from Idris' example file)

 \definefontfeature
   [test2]
   [mode=node,language=dflt,script=arab,
    init=yes,medi=yes,fina=yes,isol=yes,
    liga=yes,dlig=yes,rlig=yes,clig=yes,
    mark=yes,mkmk=yes,kern=yes,curs=yes]

  \font \TradArabic = arabtype*test2 at 28pt


kind regards,
Burak