Too much magic makes the game, well, rather muchkin-like and, well, less role play-like.
This is the unstated assumption that your average roleplayer makes, that low magic gameplay is more sophisticated than high magic gameplay, and that high magic gameplay is "munchkin".
If you believe this, I suppose you'd better stick to low level, because high level gameplay is higher magic, and therefore obviously "munchkin" and low roleplay. If you believe this, I suggest you read some of the high level story hours on this board, and perhaps reconsider your assumptions.
You also make the classic (deliberate?) mistake of being unable to differentiate between the power level of NPCs and Faerun's focus on the magical wonders of the world itself, and the power level of the PCs. The latter is under your control - if you let them make off with Khelben's treasury that is not the fault of the setting.
No, as of 3E, FR's magic is more in the form of wonders such as the Grinding Gulf or otherworldly foes such as the Shades and their floating city than it is in powering up PCs and encouraging Monte Haul gameplay - that entails a DM's decision to break the recommended rules for handing out treasure. The only way it might encourage that is that there are some very cool spells and items to hand out if you have Magic of Faerun, which might tempt a DM to hand out too much treasure too soon. Again, this has little to do with the setting.
I still use FRCS, as my players prefer this setting. Luckily I as DM give out the treasure and magic items and try to keep it low.
As noted earlier on this thread, FR operates from the same gp-value-of-treasure-per-level guidelines as the core rules, and only expands the treasure tables to include new magic items. They still all have a gp value which is adhered to. Again, if you're having trouble keeping the amount of magic items down in FR, you probably would just using the core rules as well.
Yes, they complain and mutter alot about it not being within the standards set in the core rules, but I've been trying to get them to role play more and roll play less.
Let me get this straight - adding more spells and magic items to the array that can be used in the game is a bad thing? Or are you implying that the FR spells and magic items are unbalanced? I don't entertain that idea much. Avoiding balance problems would have been one of the foremost things in designer minds when designing for it in order to avoid the "overpowered" stigma that the setting had, and to me they pretty much succeeded in this respect whilst maintaining a Realmsian flavour.