What do you mean?
You have just stated that any power you gain past 4th level is irrelevant.
That if you have a concept for someone who can cast fireballs, because that's a power you gain at 5th level, it's not valid. Given that the general "sweet spot" for 3E is considered to be around 5th-13th level, that eliminates the best bit of the game.
Oops.
The simple fact is that 3e allows a great deal of mechanical flexibility as to how you built characters. With that flexibility came the possibility of getting it totally wrong - either characters that were tremendously underpowered, or characters that were tremendously overpowered (the latter normally a design fault somewhere). The system isn't always elegant, but it's there - and people use it.
The trouble with the UA Legendary Weapons and Scion classes is that it's not flexible. It works for a very small number of characters - basically those who have decided that their character will be defined by their weapon. An unfortunate thing about 3e is that most character advancement needs to be preplanned. So, Legendary Weapons work when the DM and player sit down at 1st level and say "this character will have a Legendary weapon".
Meanwhile, I could introduce a Legacy Item at any point in the campaign and the characters could decide to use it or not - their choice. The costs for the weapons were designed so that they applied to a very wide range of characters; the only time you needed to really house rule anything was when a new power source was introduced. In my case, I house ruled the penalties for an Incarnate character.
These legacy items didn't stop the PCs from pursuing regular prestige classes. In my game, we saw an Arcane Hierophant (druid/wizard), a Fochluchan Lyrist, and a Soulblade/Illumine Soul all using these items - character builds that would be impossible with the scion system.
The big question was whether the penalties for these items were too harsh; and that is a vexed question. In general, a 20th level legacy item is worth around 200,000 gp. You could have a staggered plan for paying for its abilities and disregard the penalties... but there are problems with that idea as well.
(Abilities gained from 5th-10th level for the Items are worth about 2,000 gp each level; from 11th-16th they're around 5000 gp each, from 17th-20th its about 35000 gp each).