....Wombat Reflexes? {8^D
Anyway, yeah, the spiked chain is absurd if the DM goes with the mindset that you can trip someone with an attack of opportunity as they're getting up from prone. So far as I know, the rules don't really specify if that's viable; if the DM judges that it's not, then Improved Trip and the Spiked Chain aren't quite as overpowered, but still powerful. Normally, getting up from prone provokes an AoO, and Improved Trip in 3.5 is absurd; even in 3.0 it's almost as nasty, though not quite as sure-fire as in 3.5.
The only effective counter is a really big enemy, or a kinda big quadruped. I.E. centaurs, dragons, titans, huge elementals, dire bears, remorhazes, etc. Improved Trip and the Spiked Chain make for a nasty combo, especially with Combat Reflexes and stuff.
Anyway, the spiked chain is an excellent weapon in D&D, even if you don't bother with the Improved Trip feat or Combat Reflexes feat (though they optimize its capabilities). Improved Disarm is more reasonable with it, but still a bit overly strong in 3.5. Combining all of these can be ridiculous though. Trip someone, attack them a few times, disarm them, trip them again as they get up and hit them again, hit them or disarm them as they try to pick their weapon back up, hit them a few more times on your own turn, rinse and repeat....... As with tripping and AoOs, the matter of disarming someone with an AoO as they pick up or draw a weapon is debatable as to its validity. IIRC.
From a realism standpoint, the spiked chain is as suicidal a concept as the dire flail. But D&D and realism are rather different beasts. :^D