Fred, I think you're using the wrong forces to tackle Joe's Wizard.
The issue of high-level PC's running amok in Eberron has come up on WotC's forums several times; alas, I can't find the BEAUTIFUL thread that Keith Baker posted to that addresses what he would do in a situation like that. The two things to remember are:
1) Anyone who cannot be tackled directly can be tackled indirectly. There are STILL PC's up to 11th to 12th level in the world; for gods' sakes, there's a 17th level Inspired Psion living right in Sharn! Psion aside, House Thuranni still fields the most talented assassins in the world, and a ton of money and magic; If they were called upon, they could work a plan to catch the wizard at his most vulnerable (mind blank de darned; good old Gather Information, Hiding, and Diplomacy, mixed with a few judicious dispel magics work just fine for infiltration) and use a Keeper's Fang to take care of business. Now, if the player of said mage can think far enough ahead to handle this situation, then good for the player; my mission is accomplished!!! He had a good time playing a country-conquering mage, I had fun coming up with things to challenge him - and Eberron be damned, that's what the game is for. But preparation and mid-level (9th-11th level) elite forces can still challenge a high-level character.
2) Throw all NPC's out the door; the evil organizations and entities in Khorvaire will look at this 20th level power-player as a threat and include him in their schemes. Has this 20th level wizard just set up his own ruling body? He'll have some real fun when he finds out at an inopportune time that the Lords of Dust own the loyalty of half his council after a few months of seduction, blackmail and planning. Or perhaps his most trusted cohort (or a few dozen underlings) have been mind seeded by the Dreaming Dark, or replaced by a changeling assassin who waits for the right time to strike - maybe when the wizard is preparing his spells, or when he's in the privy.
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The Lords, The Cults of the Dragon Below, the Dreaming Dark, all these may or may not take kindly to having all their plans disrupted by some upstart (powerful though he may be) who has just cleaned house on all their secret agents, and now they have to go back through and seed NEW agents in the new regime...
In short, If you want to play the DM vs. PC game, the DM will win, every time, and maybe lose due to hurt feeling between players. However, NEVER let it be said that there are no challenges for an out-of-control player who wants to wreck society, because if you can challenge them, then you can entertain them.
My two cents...