Magic is magic. It should be able to do anything, because it's magic.
In the vast majority of fantasy literature, fairy tales, and mythology that I'm aware of, this simply isn't true.
Magic almost always has costs and limits.
The nature of those costs, and where those limits fall, varies from story to story. Sometimes these costs and limits aren't stated within the story, but must exist for the story's internal logic to hold together.
The extent of what magic can do is utterly arbitrary. There's nothing intrinsically "more real" about a magic system in which people can wave a wand and do anything, in comparison to one where magic is a slow and subtle thing, unsuitable for combat.
In some fantasy settings, magic is a matter of elaborate rituals, with rare ingredients, precise alignments of stars, and sacrifice required to achieve any significant effect.
In others, magic is a matter of daily routine. It's used for things as trivial as stain removal or opening doors that aren't even locked.
Magic can be subtle or overt. It can be low in cost, or high in cost. It can be complex or simple. It can be anything that the writer of a story, or the designers of a game system, want it to be.
Magic in D&D has always had costs and limits. The nature of those costs, and the placement of those limits, has varied. But they've always been there.
It's entirely possible, and not even terribly difficult, to make it so that those costs and limits prevent magic users from overshadowing those who do not use magic.
Where the difficulty truly comes into play is that some people want magic users to be able to overshadow non-magical characters, and others don't.
I think that the nature of the costs and limits of a given system of magic is what makes it interesting and distinct.