Your example seems weird to me. Why would the guards warn against performing magic, if magic wasn't already a known quantity? If nobody in the town had ever seen magic before, then why would there be laws against it? My baseline expectation, as a player, is that nobody in the town has ever seen magic before, so they'll probably react negatively if they do see it. Everyone's heard stories, so they could probably recognize it when it happens, but there would be no reason to warn anyone since it's unlikely to ever come up.
So in that scenario, which I consider much more likely, Fennel is chased out of town and/or killed without getting a warning first. (And the DM would have confirmed with the player, before the campaign started, that this is something to keep in mind.)
Sure, that works too. I was assuming that Fennel lives in a world where people know that magic and magic-users exist, they just probably don't know much in the way of details. So when they see someone who looks like he might be a magic-user from the stories, they let him know the rules.
Besides, since it's D&D we're talking about here, it's generally bad form (IMO) for the DM to pull something like that without the player's knowledge. There's a fairly big difference between "people in this world are suspicious of magic" and "magic-users are kill on sight in many civilized areas". Presumably a magic-user would have a general sense of how he might be received in an area, assuming the third town isn't abnormal.
I wouldn't assume that magic was a 1% thing, but more like a .01% thing - most villages wouldn't have a hedge mage or spellcasting priest, because if they did, then everyone would already have some exposure to magic. At that point, Fennel's task would have been unnecessary, since that baseline fear of the unknown is already gone.
Right. So if Fennel the Idealist's Magic for the Masses program doesn't work out (because he's no longer among the living), it's safe to say that it's unlikely that anyone is going to take his place anytime soon. Hence, a world of cantrip using casters filled with magic-distrustful common-folk.
And much of the difference between at-will magic and slot-only magic has to do with the status quo. An at-will wizard is always going to have clean robes, probably doesn't know how to start a fire with flint and tinder, and uses magic as their first-and-only resort in combat. A slot-only wizard can't afford to clean their robes magically unless it's very important, can probably use flint and tinder since that sort of thing isn't worth wasting magic on, and is somewhat comfortable with using a staff or crossbow or something. The modern wizard hasn't been instilled with the very first and most important rule of wizardry, which is that you never use magic unless you absolutely need to.
That seriously depends on what cantrips the caster has at his disposal. It isn't as though you have
all cantrips in 5e. A 1st level wizard only has 3 cantrips. Sure, he might take Fire Bolt, Shocking Grasp and Prestidigitation. In that case you might be right. On the other hand, he might take Chill Touch, Light and Mage Hand. In that case he'd have dirty robes, need to know how to use flint and steel, and might want to keep a staff or dagger handy in case he is unable to withdraw from melee.
IMO, D&D magic has never followed your first and most important rule of wizardry outside of perhaps when the PCs are on a mission. Even in 2nd edition I can recall spellcasters using magic to pull pranks while in town, such as the gnome mage who used shocking grasp to zap a fellow party member who happened to be leaning against a metal banister. There are systems out there which do follow your rule. In Mage, for example, you risk paradox most times that you use magic. In D&D, the biggest penalty for casting most spells is not having the slot available again until the next day.
Disregarding the above for the moment, there are plenty of scenarios where you might never want to use magic unless you need to. Take Dark Sun for instance. Using magic willy-nilly in that setting is a great way to end up dead. You don't even need as extreme a setting as Dark Sun per se. Simply make magic use taboo.
The at-will wizard hasn't learned to not use magic, and the DM could still create a world that behaved the same way as before, but at this point you're asking the player to give up a lot of their class perks in order to facilitate that. Asking a slot-only wizard to avoid using magic in town is not asking for much, since they were probably going to do that anyway; asking an at-will wizard to avoid using magic in town is actually asking for a fairly significant restriction on their actions.
So? It's not as though in their very first 1e/2e game the wizard player magically knew the most efficient use of spell slots. It was learned behavior. There's zero reason that a cantrip using wizard player can't learn the same thing, assuming they don't simply intuit it, since it is not rocket science. It's like saying that the fighter player will suddenly not know how to play his character if the guards confiscate his weapons as the gates. I've played a 5e wizard, and I certainly didn't rely on magic to solve every problem.
The types of players who are okay with that sort of thing will roll with it, and those who aren't will complain. I saw those types of complaints back in 2e. It is hardly a new phenomenon. IME, it has everything to do with the player's attitude, and absolutely nothing to do with the rules.