Hydrogen storage remains a significant barrier to the adoption of sustainable energy systems, particularly in applications that require high energy density and operational safety. Magnesium hydride (MgH₂) is notable among solid-state materials for its high hydrogen storage capacity, low cost, and favorable reversibility. Nevertheless, its practical application is constrained by slow reaction kinetics and high thermodynamic stability. In this study, Mg and Ni coatings were deposited onto Al₂O₃-based granular substrates using direct current plasma spraying to develop a high-performance composite hydrogen storage system. The influence of plasma torch parameters on coating quality was systematically investigated, and the hydrogenation behavior of the coatings was evaluated under controlled conditions (350 °C and 200 °C at 5 atm H₂). Structural, morphological, and compositional changes before and after hydrogenation were characterized using SEM, EDS, XRD, and FTIR. The results indicate that plasma-sprayed Mg coatings undergo significant morphological changes during hydrogenation, including surface cracking, increased porosity, and conversion to MgH₂, confirming effective hydrogen absorption. In contrast, Ni coatings display limited hydride formation but fulfill a crucial catalytic role by promoting hydrogen dissociation and enhancing surface reaction kinetics. Increased plasma power improves coating uniformity and substantially enhances MgH₂ formation efficiency. A reaction–diffusion model was developed to evaluate the effects of temperature and hydrogen pressure on hydride layer growth. This analysis identified an optimal temperature range of approximately 300–330 °C for MgH₂ formation; above this range, thermodynamic instability limits hydride stability. Overall, this work demonstrates that plasma-sprayed Mg/Ni coatings on granular substrates offer a highly promising route for scalable, efficient hydrogen storage solutions, effectively combining improved kinetics, structural integrity, and practical manufacturability.