Teleport and other long ranged travel & communications are banned by the gods.
Those spells simply have never existed for mortals. Kingdoms will be forced to send messengers the old fashioned way. They will be forced to travel, as a result there are larger than norm caravans.
First, in no D&D setting I'm familiar with is teleportation so readily accessible that messages don't get around in the old fashioned way. Teleport first becomes available as a 5th level spell, and its historically been a rather dangerous spell to use casually, so 9th and 10th level spellcasters would require very large inducements before they would teleport anywhere just to deliver a message. Crystal balls require high level spellcasters and an investment in XP to use. In short, most people - even Kings - wouldn't regularly use teleportation to transfer messages in a typical D&D setting. It's possible to have a D&D setting that did, by exploiting other areas of the rules, but I've never seen one that was set up that way.
As such, the typical D&D setting, as I said, is one where teleportation nominally exists, but effectively in how the society is described as functioning, it doesn't. So banning it would make no large change anyway. Castles would still exist. Caravans would still travel. Messengers would ride on the back of steeds to deliver their letters. That's the way a normal D&D setting already works.
Magic shops dont exist to the public because any lord over seeing an area would be immediately threatened by someone lobbing magical scimitars about.
No. The problem with this is that any lord that cracked down on wizards like this, would always loose in a war to any lord that didn't. Any lord that 'cheated' by encouraging wizards to practice their arts in his kingdom, would reap tremendous economic and technical benefits. In particular, he'd be far better armed than any of his neighbors. So any culture that made the decision you claim is normal, would eventually certainly go extinct - conquered by those cultures that made wizards welcome and part of the economic, social, and political life of the nation. That isn't to say that wizards or magic wouldn't be regulated at all, nor that wizards wouldn't be controlled by the local lords (who might be wizards themselves). In fact, that is saying nearly the opposite. But any culture that was purely magic fearing and magic oppressive just loses.
1) the black market (enter seedy types thieves guilds etc) could very easily to probably ripped off
There will always be a black market. That's not saying anything different than normal.
2) from a "secured location" within the castle grounds, pretty much a forced situation (so he can be controlled/watched)
You don't need to physically secure the wizard, and you certainly wouldn't try to imprison a wizard. What you need to do is economically secure the wizard. What you need is to buy the wizard's loyalty by making yourself indispensable to him. You invite him to be a well paid 'court wizard', the same as you would invite famous artisans, scholars, or warriors to serve in your courts. You grant the wizard stipends, libraries, facilities, servants, and assistants. You promise to protect him from rivals. You lay a nice table for him. But while that is all normal stuff, it doesn't mean that you are cracking down on the hedge wizard outside the gates that is making magically fire protected sail cloth for the merchants, or cheap potions of healing, or whatever he is making. No, what you do is you enter into a big profitable contract with him. You become his best customer. You buy so many shields +1 from him, that nobody else can get on his waiting list.
from outside any patrolled areas, 50 miles from any town, out in the middle of nowhere where they are not monitored, he doesn't pay taxes. This can be a dangerous venture for an adventurer with a pocket full of coin n gems. A couple of spells by wizard and your in some big trouble...and far away from everything so nobody to hear your scream(s)
Which is just more evidence why this would never work. If wizard's were so reluctant to serve you, that they'd be forced to go live in the wilderness and not pay taxes, then you've got something going wrong. Any culture that marginalized wizard's like this, would eventually be conquered by the one that gave wizard's tax breaks and protection.
Your assuming I am having people(s) worship multiple gods and this is not wrong, they can and do. BUT any competition of over-lapping domains, such as 2 gods with war as a domain, they will be unfriendly to outright fighting in this campaign.
But how is that any different than a typical D&D campaign? Of course deities with over-lapping domains are rivals.
There is going to be a little more witch hunting going on, more inquisitors followed by lots of burning at the stake torture and imprisonment. Clerics are seldom seen just wandering about, they are part of a large institution and advocate on behalf of such vigorously.
I have no particular problem with wizards being burned at the stake. It can happen in my campaign as well. But to much of this gets to be ridiculous.
A good example of this would be Terry Pratchett's 4th Tiffany Aching book: "I Shall Wear Midnight". In the book, Tiffany takes on witch panic, influenced by the real world's witch panic. The problem with this is that in the Terry Pratchett's stories, we are never given any reason as to why people might fear witches. It can't be superstitution; witches on the Disqworld are self-evidently real. And Terry Pratchett has in the prior three books, and in the related 'witches' books staring Granny Weatherwax, consistently portrayed witches as heroic clear headed rational do-gooders that are always helping people. So we are given no reason why anyone on the Disqworld would hate or fear witches. Maybe if Pratchett had shown more bad witches misusing their powers to abuse and control people, then there might be reason to sympathize with people fearing them. So sure, if a Wizard goes about casting 'Charm Person' on people, or creating illusions to cheat people out of their money, or summons infernal creatures, or animates grandma, then yes we would very much expect society to burn that person at the stake. And we'd expect there to be laws on the books that made it illegal to cast charm person (except in self-defence), or conjure demons, or raise up zombies and so forth. There are good reasons why people might fear magic and those that wield such powers. But in the long run, the society with the most rational approach to magic would conquer the ones that were irrational about it. If magic has been around for any length of time, it won't come as a surprise to either individuals or society as a whole.