IIRC, Monte Cook was one of the main responsibles (perhaps
the main responsible, since he signed the DMG) for the concept of prestige classes, and he mentioned that originally the idea was that every DM should have designed the PrCl for her own setting/campaign, while the DMG PrCl were supposed to be examples. Of course, since everyone thought the novelty was really cool, WotC immediately decided that PrCl should have been mass-published...
The problem then became the fact that
they changed from a DM's tool to a player's tool.
As a DM's tool, they were a good way to take a story-based condition of characters (belonging to an organization, being a paragon of your race, joining a faction, training within a special group or school) into some mechanical benefit. There is NO reason why a PC cannot join the Harpers without taking one of the Harpers' PrCls, but joining the Harpers (which should strictly require some RP effort and story development) would "unlock" the option of getting into a few levels of one of those PrCls.
In the hands of the players, they were horrible... Everybody started to look at endless lists of PrCls
like it was their right to get them and picked them a-la-carte, usually just to get more specialized into one narrow area, or end up with an averagely stronger character (occasionally also for the character concept, but never if doing so would result in an even slightly weaker PC).
I remain a huge fan of prestige classes, and think their main flaw is in the prerequisite system (which leads to planning your "build" from level 1 all the way up when you make your character, or at least some people do).
I absolutely agree. The PrCls prerequisite system is something that looks clever, but ultimately ends up being terribly stupid. Some requirements were necessary when the PrCl continued to develop some pre-existing ability, and that's obvious. But then the mechanical requirements (RP/story requirements should have always been more important but they didn't necessarily need to be spelled out in the books, they could have been left to the DM) should have been generally flexible... for example the original requirement for the Loremaster were fairly good because they were generic, to represent a general attitude and accomplishments in the fields of knowledge and divination. Specific feats and skills were almost always bad requirements, unreasonably restricting access to the PrCl to some characters but at the same time also allowing very convenient "builds" for others. Players ended up evaluating a PrCl only in terms of "balance", i.e. whether the total crunchy benefits outweighted the total costs.
Also, PrCls prerequisites system suffered from one of the most appalling meta-designing problem IMHO. Someone thought it was clever to avoid using explicit level as a prerequisites, "because access to a PrCl should not be forbidden to characters of any classe". So instead of level, they used shortcuts like requiring a feature that was available only to the core class (at a certain level) for which a PrCl was meant for, such as "at least two favoured enemies" (instead of just saying Ranger lv 5) or "sneak attack 3d6" (instead of just Rogue lv 5).
This
seems clever, because it leaves the door open for other classes in non-core supplements. The problem is, you never know what the hell of classes those supplements will have, so you can in fact end up with players finding a way to get those prerequisites earlier than lv 5.
The problem (again) is that if PrCl had been left as a tool in the hands of the DMs, it would have been a piece of cake for a DM to handle a non-core PC with her own judgement: Bob is playing a Scout instead of a core Ranger? I just overrule the prerequisite from Ranger 5 to Scout 5
for him and I know it's a safe choice. But as soon as PrCl became player's ground, with the players feeling entitled to get a PrCl because they paid for the book and they meet the written prerequisites, and are in fact exploiting the crunch of PrCl as much as possible, a DM does not change the prerequisites anymore to avoid even more exploitation.
In all seriousness ~75% of the kits and prestige classes were cover ups for the flaws of the system.
Another truth... Personally I would have rather left the flaws.