This seems most likely, but Toady has spoken of being able to turn off magic entirely eventually.
Well, we've talked a lot about magic in the previous episodes. With dwarves, our sort of baseline idea is all artifact based, and that beyond that it would kind of be slider based, you could go to the no-magic world, or the very minimal magic world, or you could start getting into this kind of factory-based magic that we'd prefer to stay away from for the default setting. I mean it's like D&D magic often seems kind of factory based.
That depends on how the game categorizes what gets called "magic", however. Again, if a modder makes a raw-defined reaction to make something out of nothing, the game isn't likely to call a violation of Conservation of Matter. A "no magic world" might just mean things like secrets, caverns, and syndromes that cause were-curses are turned off, and maybe disable every creature that doesn't have [MUNDANE] in its raws. It all depends upon being able to flag and disable what
is the "magic" in the game in some reasonable way, and of course, mods can put all bets off.
Toady in that quote is specifically talking about how players can harness magic, and how he would prefer to avoid, say, allowing players to mass-produce magic fire swords the way that you can mass-produce masterwork steel and candy swords to the point they become mundane, predictable exercises in equipping your troops with the objectively best gear. So far, his only real way of doing that has been to just keep magic from being directly in Fortress Mode player hands. Magic thus far, however, as evidenced by necromancers and turning into an undead in Adventurer Mode, really is just as routine as he'd hoped to avoid. If you are a necromancer, it's just a matter of finding good corpses to raise, and you can do so for free. For that matter,
Loud Whisper's Silentthunders (spoilers), where necromancers are imprisoned and forced to make undead armies as weapons in the service of the dwarves just proves you can still use that magic
indirectly with some clever engineering.
The problem is that he wants there to be, as you put it in that Suggestion Forum thread yesterday, "mystery" associated with magic, but faces severe structural challenges from the very nature of this being a formal, Turing-complete ruleset videogame that make keeping magic a "mystery" a virtual impossibility. For elaboration on reasons why, I'd point to
Errant Signal's video on why so many games use violence as their central topic.