I voted Overpowered, due to the impact on the party.
Incidentally, the best time to go for MsT IMHO is probably after Wiz7/Clr3. Get fourth level spells under your belt from wizard, nab three levels of cleric and then take MsT for the next ten. The MsT is a bizarre sort of prestige class- nearly every other prestige class is most effective if taken as soon as possible, whereas this is most effective is delayed until almost as late as possible. This also negates the critique levied at what is, admittedly, its weakest stretch (character levels 7-10).
Essentially, the trade-off is an interesting one. You lose out on three item creation/metamagic feats, familiar progression and three levels of arcane spellcasting in return for (eventually) thirteen levels of clerical spellcasting (and, for what they are, worth, some more HPs, better armour and weapon proficiencies and three levels of turning).
The question is this: is this worth it? Quite simply- yes.
Let us analyse each component of what you 'give up'.
(Incidentally, I am assuming that the prerequisites are too trivial to have make an impact. Any respectable wizard has K(A), any respectable cleric has K(R), especially one with a presumably decent Int).
Three item creation/metamagic feats
I wouldn't say that this is a biggie. By 10th level, a human caster has Scribe Scroll plus six other feats. Especially if only using core rules, these feats should easily be enough for the wizard to take all the metamagic he needs, and item creation is rarely used (at least, as far as I've seen). It does make an impact, but a minor one.
Familiar Progression
Virtually trivial. Having a familiar is useful (mainly for the stat/skill bonus) with a few nice extras (delivering touch attacks, scouting etc.). Past that the incremental value is relatively small.
Three levels of spell progression
This is obviously the big one. Is delaying three levels of wizardly progression worth thirteen levels of clerical spellcasting.
To my mind, undoubtedly.
Assuming a Wiz7/Clr3 entry, the MsT does not lag awfully behind, especially at the even levels. By the mid levels, there is nearly always a slightly inferior version of a higher level power. Phantasmal Killer may be a poor substitute for Disintegrate, but it can do the job. In terms of blasting, the MsT is hardly handicapped whatsoever if 7/3 entry is followed. His fireballs are doing 3d6 less at a DC two lower than his single-classed colleague's Cone of Cold, but this is hardly a crippling sacrifice. The fact is that past a certain point, spell power progression beomes almost linear (exception: Time Stop). In terms of utility spells, the single-class wizard is difficult to compete with (Dimension Door is a poor substitute for Teleport) but then if a single-class wizard is present in the party, the utility spells are normally covered.
So in terms of sacrifice, it is a hit, but not as bad a one as some would make out- especially given that the last three levels enable you to completely catch up. The holy grail of 9th level wizard spells are not out of reach.
The point of flexibility is a powerful one. Bards aside, the notion of spellcasting in DnD is built on a separation of tasks. Clerics heal and buff, wizards generally disable and blast. There is some overlap in the middle with buffers and disablers, and the clerics have a few blast spells, but generally this maxim holds true. The Mystic Theurge is bridging this gap gains far more in terms of spellcasting prowess at little sacrifice. Moreover, he is an effective back-up if a relatively inferior substitute. He can teleports away at the higher levels if the party wizard is dropped; similarly, he can heal the downed cleric or even raise him from the dead. In party utility, therefore, the mystic theurge is phenomenal. Finally, there is the matter of interesting spell combinations. Blade Barrier + Wall of Force; Contingency + Heal (using Harmonic Chorus to bump your caster level
)- these are powerful combinations of which there exists hundreds. That the Mystic Theurge can pull them off single-handed nearly doubles his party effectiveness.
