The whole idea of a conflict over power between DM and players over the power in the game is mind boggling to me. The concept that the game suffers if the DM looses the right to control his players is absurd. It's like this:
A sentence like:
Any time a player can use the rules to veto the creative input of the DM, the game potentially suffers.
Sounds logical and great until you realise that the sentence:
Any time a DM can veto the creative input of the players at will, the game potentially suffers.
There, you've got a dilemma. Look at both sides and you quickly realize that this whole thing is a pointless conflict. It's a struggle of power, a wish of dominance and sense of "my fun first". Thus we venture into the realm of interpersonal drama and leave the realm of roleplaying games.
Whenever there's a disconnect between DM and players or players and players you've got a conflict brewing.
A working RPG group has to be a group of homogenous people ready to work together and step once in a while to ensure an equal amount of fun. Control and power over the game has to be shared not put into one hand or divided among disconnected groups. The DM is the team leader, that helps the communication along and moderates it.
The idea of the DM as the ultimate arbiter of the game and fun is outdated has to be relished, but not in favor of player control, but in favor of group control.
For the issue of organic character developement:
Allow a certain degree of rebuilding based on in-game events. If characters can be rebuild players aren't as concerned with "getting the build right". Organic character developement isn't so disadvantegous. An example:
The ranger 7 Whispersand gets into touch with her natural side and wants to become more atuned to the natural world. Now, honestly, multiclassing into druid at that point would suck. But if Whispersand was to leave into the desert one eve during downtime, where she trains with the elders of stone and returns as an Druid 7 with some realocated point buy points (she developed new spirituality, but left behind some of her physical training) some ranger proficiencies and feats/skills that hind at her old self left . Now that's organic, after all linear advancement can never really be organic, since true developement also means you get worse at your old abilities as you turn to new things.