As a DM and a the player of a midlevel archer in a RtToEE campaign, I can testify that archers can be very nasty.
On the other hand, I do not believe that archers are overpowered by the ability to stack bonusses from magical weapons and armor.
Several factors have been discussed here:
-Limitation of available strength bonusses. If the archer has 18 strength and dex, the melee fighter probably has at least a 20 strength or something is wrong with the melee fighter's construction. (Either that or someone rolled well on 4d6--if that's the case, the randomness of 4d6 which allowed the exceptionally powerful character in the first place is your problem, not stacking enhancement bonusses). It is quite likely that the fighter will be further buffed with spells like Bull's Strength, etc as well.
-Limitation of feats. As Rackhir said, Point Blank, Precise, and Rapid Shot are necessary for an archer. (Sharpshooting (Sword and Fist) is really helpful too. However, after that, there are few feats that help an archer. Weapon Focus, Weapon Specialization (only within 30'), and improved critical work on bows (almost) as well as on melee weapons but power attack, cleave, great cleave, and whirlwind attack are inneffective with ranged weapons. Incorporating builder book materials, there are no ranged equivalents to the Two Weapon Fighting/Ambidexterity/Shield Expert/Improved Two Weapon Fighting/Supreme Two Weapon Fighting and Power Critical (MotW) feats. Archers are limited in their ability to improve their damage through feats.
-Limitation of Ammunition: Magic Arrows are ridiculously expensive for a consumable commodity. Greater Magic weapon also creates limited quantities of arrows. (A high level character who might expect to have access to GMW from a friendly wizard or cleric will often go through one casting in 10 combat rounds. In any dungeon crawl type campaign, they should expect to see more than 10 rounds or combat in a single day thus necessitating lots GMW spells (a melee fighter would be ridiculously deadly too if he had an empowered bull's strength (4th level and thus equivalent to GMW) and Weapon of the Deity (4th level from DotF) cast on him every couple of combats).
Of course, the Arcane Archer prestige class doesn't suffer from this limitation (as one poster noted). But that's a function of the prestige class and is not inherent in the way 3e handles archery.
-Prestige Classes. Since there are very good archer prestige classes available (Arcane Archer, Deepwood Sniper, Order of the Bow Initiate) and this problem of stacking bonusses is highlighted by the arcane archer's abilities, it is only fair to note that there are many prestige classes available which offer melee fighters similarly powerful benefits (Weapon Master, Master of Chains, Templar, Duelist, Spellsword, Bladesinger (Web-Enhancement version), Dwarven Defender, Tribal Defender, Tempest, Frenzied Beserker, Master Samurai, etc.)
A lot of this discussion has also focussed on an archer's supposed ability to gain all these bonusses in a dungeon setting without being in melee. This seems a bit wrongheaded to me.
First, while most archers can be expected to have precise shot that only cancels the penalty for firing into melee. It does not eliminate the cover which a friend in your line of fire provides to your opponent. So firing into melee should often (usually) be harder than swinging a melee weapon--even with precise shot.
Second, many archery bonusses apply only within 30 feet. Since this is within a standard move for most creatures (and it's still within charge range even for an encumbered dwarf wearing full-plate) any archer who is getting a full rate of fire (and hence not using Shoot on the Run which is a very difficult feat to get since it requires archery feats AND spring attack) is vulnerable. In the absence of an intervening character (or other force), the foe is likely to charge the archer and sunder the bow in the next round. (And that's ridiculously easy to do since a character with a bow doesn't threaten an area and consequently can't take the AoO that a sunder attempt (without the feat) usually entails. Furthermore, according to the Sage (and now the FAQ), since a bow isn't a melee weapon it counts as a held object rather than weapon and the archer isn't even allowed an opposed attack roll. To add insult to injury, bows are hardness 5 with 5 hit points and are easily sundered even by weak characters using one handed weapons (maybe slightly higher with magic but unlike melee characters, archers can't get mithril or adamantine bows to foil sunder attempts.) A smart archer can certainly draw a melee weapon as soon as a foe closes (with quickdraw perhaps) but the archer will almost certainly be less effective in melee than a character who's constructed for melee effectiveness. (If he is, then he's not constructed for peak effectiveness as an archer. . . .)
Now maybe in a dungeon crawl setting there is usually a melee character who prevents the bad guys from coming to grips with the archer but that doesn't mean this isn't a weakness. After all, melee characters usually keep the monsters off of the wizards but nobody would deny that a wizard's melee vulnerability is a serious weakness of the class.
Now, this may not convince you so I'll analyze the proposed changes (ignoring the masterwork changes).
What effect would eliminating bow/weapon enhancement bonus stacking have?
Low levels: None--characters rarely have magic bows and magic arrows at these levels. If they can afford to have both, then it's probably the high magic level of the campaign that's causing problems not the rules themselves.
Mid levels: Greater Magic Weapon could lose much of its utility. On the other hand, if most characters treat archer construction as I've seen in the past, they'll have +1 flaming shock mighty [+4] composite longbows instead of +3 bows so they're only losing +1 to hit and damage (all of the rest is elemental and wouldn't be lost under these rules).
High levels: This is when it will probably make the most difference. The archers have probably seen one or two bows sundered and are now getting +3 and +5 holy flaming bows or would regularly have their friends cast Greater Magic Weapon on both their bows and their ammunition. However, these are the levels when archers are beginning to run out of things to do. The melee fighters probably have power attack/cleave/weapon focus/weapon specialization/improved critical/power critical or spirited charge/weapon focus/improved crit/power critical or (paladins and multiclass clerics) power attack/divine might and a 22+charisma. Odds are very good that the melee fighters also have strengths of 22+ at this level (and would often have strengths as high as 26 to 30 (before raging) if they could convince the cleric and wizard to spend as many spell slots on them as they're presumed to be spending on the archers.)
Compare the following characters
12th level fighters
Bow: attacks for 1d8+17 at +27/+27/+22/+17
(12th level: +4 bow, +4 arrows, weapon focus/specialization, point blank shot, 22 dex, 18 str, Bracers of Archery)
Defensive Melee: 1d10+13 (more with power attack) at +24/+19/+14 (12th level,+4 bastard sword, weapon focus/specialization, 24 strength) with the potential for more from great cleave and/or whirwhind attack
Barbarian Melee: 2d6+19 (more from power attack) at +27/+22/+18 (30 strength while raging, +4 greatsword, weapon focus) with the potential for more attacks from cleave and great cleave
Paladin Melee: 1d8+16 (more from power attack) at +23/+18/+13 (+4 warhammer, weapon focus, power attack, divine might, 22 str, 22 cha) with the potential for more attacks from cleave.
Dual Wield Shield: 1d10+12 and 1d8+3 at +21/+16/+11 and +16/+11 (+4 bastard sword, shield of bashing, 22 str, weapon focus/spec bastard sword) with potential for more attacks from cleave. (Feats required: 1. Two Weapon Fighting, Ambidexterity, EWP: Bastard Sword, 2. WP Foc Bastard Sword, 3. Shield Expert, 4. Weapon Spec. Bastard Swd, 6. Power Attack, Cleave, 8. Greater TWF, 9, 10,12,12 open (probably, iron will, improved critical/power critical bastard sword, supreme two weapon fighting).
No Stacking Bow: 1d8+13 at +23/+23/+17/+12 (as above but bow and arrows don't stack).
4th level characters
Bow: 1d8+4 at +8/+8 (4th level, +1 bow, 16 dex, 14 str, weapon focus/specialization, point blank shot)
Melee: 1d10 +5 (+power attack) at +9 (+1 bastard sword, 16 str, weapon focus/specialization) with more attacks possible from cleave
Barbarian melee: 2d6+10 (+power attack) at +12 (+1 greatsword, 22 str (raging), weapon focus) with more attacks possible from cleave.
At high levels, the additional attack from rapid shot makes less of a difference and the magic bow/arrow stacking makes more of a difference. Dissallowing the stacking makes the archer's damage output similar to a defensively oriented (weapon and shield) fighter who isn't using power attack and doesn't whirlwind attack/great cleave. Allowing the stacking makes the archer compete with a damage oriented (two handed weapon wielding) fighter who isn't using power attack and doesn't whirlwind attack/great cleave.
These figures will also be more to the advantage of the melee fighter at high levels if your group plays with high statistics as the characters will tend to have higher strengths than shown here. In that case, archers will probably do less damage than defensively oriented fighters (at high levels) unless you allow stacking.
