Camarath: I did the numbers quickly, but off the top of my head, I think you gave too little luck bonus to hit and damage. Divine Favor at CL 18 is +6/+6. And I did forget the haste attack.
Regarding the 20th level example: That character was not epic. Close, but not there. It wasn't even optimized, either. If we used a medium sized character, enlarged it to give it reach (or polymorphed it into a large or huge creature and gave it appropriate weapons), it could be far nastier. I bet I could get that damage up over 2000.
Regardless, a midlevel character can do similar things. A 9th level druid that is wildshaped into a tiger and then animal growthed is size huge with an impressive reach. If he has combat reflexes and great cleave, casts bull's strength, cat's grace and a few other spells (greater magic weapons, etc ...), he can pounce on a BBEG for 5 attacks, and then cleave off of minions that provoke AoOs from moving for another 5 attacks (cat's grace on a tiger gives it a dex of 19) on the BBEG. Those 5 extra attacks are with the tiger's best weapon, so they are better than the normal attack routine. If you add in spells from other PCs (haste, etc ...), this druid becomes a nightmare.
What about a melee rogue at 9th level with combat reflexes and great cleave? If he has greater invisibility and enlarge person, his attacks will probably be doing 25 damage per attack and he'll probably have a dex of 24 or so to allow a total of 8 AoO/cleaves onto the BBEG to go with his normal 2 attacks. Instead of 2 attacks for 50 damage, he'll generate up to 10 attacks for 250 damage.
This is too strong. It also leads to odd strategies by the PCs that make no 'real world' sense. Placing reasonable limits on this issue makes sense. By the time someone has built a character exploite this rule issue, they'll feel entitled to the insane damage potential whenever they can set it up and will tend to resist the changes in the rules.
"Hey, wizard, don't fireball the minions. I want to cleave off of them into the BBEG!"
"Wait, don't kill the prisoners. I want to drag them to the throne room and give them weapons so that they'll try to defend their king. Then I can cleave off of them and finish the king in one round!"
"Hey, wizard, quick, use your summon monster III to create a few dire rats to attack me. Then I can kill them, and cleave off of them into the BBEG!"
Regarding spiked chain: Other ways to get 'option' reach are available. For instance, enlarge person does the trick.