I don't think that having perfect mathematical balance is important. Only a rough sense of balance is important, and that balance comes from the DM just as much as from the rules.
The wider the range of magical bonuses, the more mathematically unbalanced it becomes (absent proscribed equipment, careful shepherding, etc.). Moreover, the wider the range, the less flavorful the lower end becomes, relatively. That is, if you only go to +2, +1 is pretty nifty. If you go to +10, +1 is a speed bump on your way to something better. Somewhere in between you maximize whatever flavor +N brings (whether that is a lot of flavor or a little; if we are going to have it, we'd like to have most of it).
The narrower the range, of course, the less variation you have to improve equipment straight. Some people will see this as feature, not a bug, but it is undeniably there. Presumably, the deficit will be made up by things other than +N: Trading in your +1 longsword for a +1 flaming longsword becomes the upgrade. (And then later you get a +2 longsword and have an interesting choice to make, but that is neither here nor there.)
I think by +5, you've definitely wrung ever last tiny shred of flavor out of +N. The push to go to +6 or higher seems to be merely a needless symmetry with having 20 or 30 levels. So to me, the real argument is does +3, +4, or +5 bring more to the table than what they cost in balance and stylistic hoops? (For example, having to jump through too much "equipment churn" could be a stylistic issue for some groups).
A side question is how much variety can be introduced in between +N and +N+1 that will be seen as an "upgrade" for those that like to improve their equipment on a regular basis? For example, if two clear "upgrade" tiers can be identified between weapon +1 and weapon +2 (whether glowing, flaming, secret door detection, etc.), then you can easily have 6 to 9 levels between getting the first +1 weapon versus finally replacing it with a +2.