I'm not sure how to implement this idea, or if it is even possible, but I would like to set up an item, that when a hero uses it on a specific monster, it transforms them into a different creature (Ex. a polymorph potion that transforms a dragon into a sheep, etc)

I know how to make a monster transform, and I have the monster stats made for the transformed form as well, but I'm not certain how to go about scripting the monster to transform once the item is used. Also if possible, I would like to make it so the item can be used on an individual specific monster, rather than every monster in the battle.

Any input would be appreciated.

Possible for one creature? No. Possible for all the creatures with the transform ability? Yes. Would that be okay?

You don't need to script to be able to do this. Make a new item, name it 'Creature Transformer' or something like that, change the item's common event to an empty common event slot, Create a new common event on the same slot and make it so that it transforms monsters into different creatures using the 'enemy transform' event command. I hope I helped somewhat. If you still need help, don't hesitate to ask.