Too powerful magic in a very advanced and realistic world simulation can easily lead to it being overpowered, and that's what I said - you can easily imagine that the first wizard to master powerful magic years before others will be able to win battle after battle solely with his magic, or burn whole towns to the ground in no time. Not everyone would like it. If, on the other hand, powerful magic was common, the destruction would have been enormous as creatures would ordinarily destroy everything around them with magic. I don't like that either.
Basically, I was always under the impression that magic is always the weak point of fantasy worlds - if it is so common and so powerful, how come it has not led to the destruction of the world yet? If it is rare and still powerful, how come it was not used to take over the world by those who have mastered it?
The great thing about a world that "lives" is that these things self-balance. You run a world-fragment for the default 1,050 years, and that should give plenty of time for things to stabilize into a stable or at least meta-stable state. Anything that isn't compatible with the rules of the world will either die out, adapt, or be rare rumors in forgotten vales and caves.
If there's powerful fire magic around, successful settlements will be biased toward compartmentalized underground cities dug into bedrock with sophisticated plumbing; thriving creatures will be fire-resistant, heavily mobile, and tend toward
r-selection, and the forests will be either trees that resist fire (Ponderosa Pine, Mountain Grey Gum) or that reseed rapidly after fire (Lodgepole Pine). There's likely to be a fair amount of chaparral. And none of this needs to be programmed or balanced if the world is done right; it just naturally evolves from things getting burnt regularly.
Similarly, in a world with powerful air magic, buildings might either be light and easily replaceable, or heavy rounded domes. Lots more streamlined creatures, and probably more prevalence of features we're accustomed to seeing in desert or marine animals, such as secondary eyelids, closable nostrils, and advanced breath-holding tricks. Again, if the world is sufficiently "live", none of this has to be programmed explicitly; it just evolves naturally from the given conditions. Creatures, plants, and entire civilizations will do poorly if they're not well adapted to the setting; and do well if they are.
Taking another tack... what is to say that the magical Ragnarok hasn't already happened? Many mythologies have vast cosmic powers battling it out for supremacy in the dawn of the world; mountains toppled, forests shriven, seas out of their beds, and so on. In fact, in some mythologies, the world we live in is the direct result of such a titanic (literally) battle, growing out of the corpse of some primordial being.
To put it in Tolkien terms, there's nothing wrong with wanting to play out a mid-Fourth Age campaign, where few elves remain this side of the sea, sad and hidden, and the past glory of Gondor is but a tale for children as the petty kingdoms of the West squabble among themselves to the benefit of the powerful Haradrim clans. But some of us want the option to play in the Second Age, the Last Alliance... or even the First, the epic War of Wrath. And would the Third Age be as much fun if it didn't have the rich history of the First and Second behind it?
So that is why I would like magic to be highly customisable - I am not entirely anti-magic, I would like to see some kinds of it, but very hard to master, and some enchanted items, though again very rare, and not too overpowered. I like plausbile and I like realistic, what's wrong with that?
There's nothing terribly wrong with wanting something that is more along the lines of historical fiction or alternate history than actual fantasy. Toady has explicitly said that the fantastic-o-meter will be able to be set all the way down to zero, or put very low. That said... it's a minuscule, tremendously limited, and unimaginative subset of the vast wondrous domains available to us. I know someone in RL who prefers things *very* plain; a hamburger meal is bun plus patty. No cheese, no condiments or sauces, no vegetables, no toppings, no sides; two pieces of bread and one piece of meat, end statement. If that's what they genuinely prefer, there's nothing *wrong* with it... but I'm always somewhat sorry for them that they're going through life missing out on all the wonderful sorts of burgers you can get or create, let alone the absence of all the joy one can get from the myriad cuisines of the world.