1. Maintain the challenge as the players progress without "numbers bloat".
Address this through tighter control of which modifiers are available, have a stricter control of what provides which kind of modifier, and keep them low. (basically fewer modifiers, lower numbers, logical progression).
2. Provide rewards to the players that don't necessarily just increase the numbers.
?? You can do this already?? Levels add numbers, while roleplaying provides other non-numeric benefits: associates, friends, land, deeds, titles, prestige. Do we need to have this broken down into rules? Surely that is counter to what you are trying to achieve?
3. Keep the numbers in check so they don't restrict the flow and pace of the game.
See point 1 above
4. Make the game easier for the DM to run but not over-simplified so as to limit his options.
See point 1 above.
5. Allow the DM to advance the story arc as the characters advance without being forced to deal with certain "campaign-changing" spells, powers, abilities, etc.
Basically, I made certain changes IMC, but I'm not certain about which spells and powers you think are campaign-changing. The presence of
everburning torches changes the flavour of a campaign.
Anyhow I made the following changes:
Removed or drastically altered all
raise dead type spells.
Teleport spells are reduced in range, so it doesn't provide cross-continental travel.
There are spells to counter teleport, and so it isn't such a mundane exercise.
Shadow walk is now utilised (dangerous as it is), as are boats.
Fly and
invisibility spells are drastically increased in spell level.
Removed the Ethereal plane.
Made it much more difficult to attain bonuses to skills via magic. DnD as is reduces the rogue to a sneak attack machine.
Reduced the number of spells providing bonuses overall, and made them more logical, and less stacking.
I made these changes because, I wanted to have a campaign where traditionally fantastic elements still remained achievable, (flight, invisibility, teleportation), and yet were not commonplace.
The basic problem ("without being forced to deal with certain "campaign-changing" spells, powers, abilities") being highly subjective, and as people's solutions vary wildly, we are left with just that: being forced to deal with camapaign-changing spells. Just because these spells are so very powerful, and affect people's understanding of the campaign world. Yet no one can agree on just how powerful, just what limitation, just how common, they should be.