I'm not sure I agree about the scale... after all, while Greyhawk was one of the two oldest campaign settings for D&D, the SRD provided a free alternative to getting a fair amount of the 'look and feel' of Greyhawk. Admittedly, almost all of the settings specific stuff was in the Gazetteer, but that was one book for comparatively cheap. All the supplements you speak of are simply options. Nice options, but still.
Duplication, yes - but that was hampered by the policies for development at WotC. While it doesn't address the issue of overlapping stuff in the same book, creators had to design each book (for the most part) with recourse only to the core books.
"Munchkining" is a people problem, not a rules problem, as I've long said. But you do have a valid point, some rule systems are more open to abusive players than others. And NI or ∞ loops don't help. Basic spell, grammar, and math checking is always good. It is also good to keep in mind however, that if options are open to players, they are open to the DM as well, and there is always someone who is stronger, faster, smarter, or simply better than you. This is as true in game as well as out of game.
However, I don't think that too much magic isn't the real problem. From the beginning, D&D was a game of EPIC HIGH fantasy. Magic is supposed to be prevalent and earth shaking. The unconscious assumptions built into the magic system and the game itself, legacies from the original creators which were never addressed or questioned certainly make it challenging when designing new stuff, admittedly. And Mordenkainen is a MarySue character if ever there was one. Even in 3rd, he's in the 30's level wise, not to mention how much he messes with stuff.
Religion... again one looks to legacy attitudes and concepts injected by the original creators to understand that one. You can probably infer that there was some dislike of religion on the part of certain people.
Race and class creep. Yeah, it's a great idea, and in some ways rather realistic, considering. But, they needed to make more of the mini-classes, and less of the standard 10/20 stuff to really inject variety, without running stale.
I'm known for my detest of the Vancian system, so don't even get me started on magic or spells. I wasn't very happy that they made psionics sorta-yet-another-version-thereof, but at least with the power point and augment system, there is some leeway and unique feel.
I fully agree about the building and options aspects - that is part of the reason why Athas should stick to it's Charter and keep producing more quality 3x material. And only 3x material officially. I have no issue with people contributing to other editions, but here, on Athas, 3x should remain forever king, and all official product should be actively looking towards improving the rules and mechanics as well as expanding upon the setting and roleplaying support materials.
The options are why 3x is my favorite D&D system, the ability to mix and match and create your own concept... class... if you will, by merging different classes and prestige to make a mix of abilities uniquely yours. Me personally, I like systems that are flexible, provide lots of cool options, yet also scale up into the epic world-shattering levels of power.