Tallifer
Hero
Personally, I hate the Christmas Tree Effect. I guess I'm one of those huffy DMs... I've pretty much decided to always use Inherent Bonuses from here on out. I will still hand out some magical goodies, but now characters won't resemble oversized magical charm bracelets, and when they do find a magic sword or ring, it will feel special, and in fact, it will be special, probably of near- or at artifact level...
I came to this conclusion gradually, but not lightly. I know some gamers like dime-a-dozen magic, but my group tends to prefer it the other way. These things should not feel cheap, nor should they be commodities to be bought and sold on the open market in my campaigns. Doing it this way, or rather, continuing to do so after the advent of 4e and all its structured bonuses and expectations Makes Sense, since we're mostly old grognards anyway.
I myself love the ideas from the second Dungeon Master's Guide about legendary and divine boons and grandmaster training. It means that characters can have interesting, story-based gifts, but there is no need for the world to be filled with mundane magic or for Xmas tree heroes.