We study crystallization of paramagnetic beads in a magnetic field gradient generated by one-dimensional nanomagnets. The pressure in such a system depends on both the magnetic forces and the hydrodynamic flow, and we estimate the flow threshold for disassembling the crystal near the magnetic potential barrier. A number of different defects have been observed which fluctuate in shape or propagate along the crystal, and it is found that the defect density increases away from the nanomagnet. We also study the melting of the crystal/fluid system after removal of the nanomagnet and demonstrate that the bond-oriental order parameter decreases with time. The nanomagnet can be moved in a controlled manner by a weak external magnetic field, and at sufficiently large driving velocities we observe self-healing crack formation characterized by a roughening of the lattice as well as gap formation. Finally, when confined between two oscillating nanomagnets, the colloidal crystal is shown to break up and form dipolar chains above a certain oscillation frequency.