There's a funny synergy that happens between the game world and the mechanics of the game. When you key in properly, things start to align that you didn't expect... to whit:
In reviewing material for the game world, it's become clear that magic items should be, almost exclusively, relics of the lost world. No one can make magic items anymore; this makes them rare, powerful and prized.
In reviewing material for the game system, it's become clear that proliferation of magic items works against the very fundamentals of the game. The game is all about the abilities of heroic characters, not about how much cool stuff they can wield. The only places where the mechanics continue to break down for me is when I try to have multiple layers of magic items with various bonuses and modifiers. I can simplify everything else about the game, but I cannot get this cleaned up to support large levels of magical buffs, potions, armor, weapons and items granting multiple bonuses. It's almost like the game defies these sorts of efforts.
They don't fit because... well... because they don't fit. They don't belong. I've gone back to Lord of the Rings, looking at the few magic items that make their way into the world, but all have character, history, and value. In D+D, everyone needs a +1 weapon, because a lot of creatures after the first few levels can only be hit by +1 weapons; the same holds true in a few levels for +2 weapons, and a few levels after that for +3 weapons. You better not think about taking on a powerful demon without at least a +4 weapon by your side (since traveling between realms is going to knock it down a + or two right away). As long as the monsters don't require magical weapons (and traditional monster lore only requires a handful of monsters to require magical weapons to strike - thinking here of Vampires and Werewolves mostly), you don't need a lot of magical weapons and items in the game. Sure, the Ringwraiths are a big deal in large part because you need a magic weapon to face them; however, I can pretty much guarantee that every hero will have some magical weapon by level 5 when Ringwraiths (or something comparable) could first appear as a viable option to fight. This doesn't mean that each hero will be on his fourth magical sword at that point...