A couple of updates:
I've finally got a chance to look at DMing again (grad school + getting married is a fine way to make yourself too busy to DM

)
First, in the above problem, I've decided that Swordmages are essentially a form of bodyguard. Some are mercenaries, some are part of government organiztions (like the Secret Service), etc., but it is considered one of the many legitimate combat forms that bodyguards practice in Avalon.
Second, I've finally decided the overarching scheme and cause of magic loss using a bit of D&D deity tweaking.
Now, I mentioned above that there is only one God and a bunch of saints. And similarly, there are those that follow the teachings of certain people deemed heretical by the major churches. The general assumption is that all of these people died a long, long time ago.
What if this were not the case? What if each heretic, unlike the saints, found some way to stay alive, and no one but the heretics themselves are aware of this? So, here's the gist of it all:
Long ago, there was an Eladrin Wizard named Tharizdun. He was one of the first people to experiment in extraplanar magic. He summoned the first elemental, created the first bag of holding, etc. One day he tried to create his own plane of existence, apart from all other beings, including God. Much to his dismay, he succeeded.
His associate, a human Wizard named Torog, studied powerful binding magic. Thier relationship was purely academic, as Torog's methods and ethics were often of a questionable nature. Tharizdun needed his help to make the interplanar portals stay in place. When he created this new plane of existence, Torog seized an opportunity to come into great power. He betrayed Tharizdun and bound him to this new void of a plane, this Abyss (I may come up with a better name later). Thus, the plane's existence would be sustained by Tharizdun's presence. Tharizdun also learned that time does not pass there in the same way that it passes in their plane. In being trapped, he was also trapped into immortality. Over time, he would go horribly insane, obsessed with his own release and revenge.
Meanwhile, Torog found two companions, the Drow Lolth and the Human Vecna. Together they hatched a scheme. In this new pocket of existence, they could create their own world and take this one there to rule the Abyss as gods. Lolth would weave the fabric of the new world, and Vecna would find a way to channel magic from this plane to the new one to fuel Lolth's creation. Each found their own means to immortality as well as starting their own cults to do their bidding from afar.
Thousands of years passed. Finally, the hidden flow of magic is beginning to take its toll and the world approches a tipping point. Other heretics that have lain dormant have gotten wind of the plot and wish to rule alongside the others.
But one, Asmodeus, sets his sights higher. He schemes from the background, currently disguised as Senator Silvanus Horatius. He seduced Lolth with promises of power, eventually learning of the plot and devising a means of taking advantage of it. When the plan of the other heretics comes to fruition, when the creation of the new world reaches the point of no return, he will rise up to topple the other heretics and rule as king.