How exactly does the device work? Does it basically create an MD several thousand miles in radius as a burst effect? The dieties may have something to say about that, considering that there are almost certainly more than 20 artifacts within that radius. Anyway, it does not prevent the creation of new magic items, and such are probably already being created. Likely, the wealthiest institutions (ie: empires, massive kingdoms, etc) have likely already hired most of the highest level mages to replace items lost due to the effect.
If the artifact's effect is lingering (which your posts seem to suggest), then howso? If magic items truly cannot last more than a few days (perhaps 1d4 per CL in days?) then the highest mages are not only hired (thus unavailable to others), but they are also being abducted, blackmailed (with the lives of f&f), etc. Some are likely striking back. How is this affecting the arcane / divine division? Do divine magic items last longer (perhaps +Dvn Rnk of the deity to the count above)? If so then clerics have a little more influence than before. If not, then they are in the same situation as the arcane casters. Wars are occationally being waged over towns and cities where major temples / mage colleges happen to exist.
Does magic - typical spells - work as normal? If so then spells such as GMW are more important than before. If not then it is possible that crop yields (likely long influenced by Clerics with the Plant domain, local Druids, etc) are now at an all time low. The Roman empire and many others have fallen due to such over the course of a mere few years. It is possible that half the kingdoms the PCs knew are no more - collapsed into anarchy due to starvation riots. The remaining ones are diminished and more authoritarian - to better deal with the situation, of course.
The prior posts about creatures with DR is significant, but if magic itself (even day to day spells) is diminished, then their magical abilities should also be diminished. Decrease DR / magic or alignment by 5 points to represent this. Note that due to using the 3.5e (rather than 3e) system this is not as much trouble. Cold Iron and Silver are still available, still working normally. Aligned weapons are moot, but basic lower level spells can temporarily deal with that issue. DR / magic is a concern, granted, but if the DR is 5 points lower than it is not as big of an issue. Creatures with only DR 5 / magic no longer have DR, and those with DR 5 / silver and magic now only have DR 5 / silver - a much more readily overcome ability. SR should also be lowered a little (perhaps 2-4 points, across the board). This would remove the SR of Dwarves, I note.
As magic is diminished, force of arms becomes more important. City walls are higher, armed men more numerous - albeit (at first) poorly armed. Casters are viewed with more envy - resulting in a surge of apprenticeships (sponcered by those highest in power / rank), but casters overall are viewed with more apprehension and anger. "Surely whatever caused the Cataclysm was magical in origin!" is likely a common view, and those that wield powers - powers now viewed as less stable, less dependable, less useful, less understandable - are now likely viewed in a less positive light.
Perhaps some regions of the world were actually under protective magics from minor artifacts - items that now are powerless. Suddenly regions along deserts are slowly dissicating as the deserts expand into them. Suddenly regions along the shore that have never known a storm are often beset by such. Perhaps, in times past, several djin or fiends were captured and contained / imprisoned. Now they are free to wander as they will. Dragons, long a dangerous consideration, are now vastly more powerful due to the lack of readily available magical weapons. If the PCs take more than a couple years to emerge, it may be to a world utterly changed - kingdoms fallen, new ones risen by force of arms, dragons now openly and commonly besetting many lands, weather gone wild, deserts / wild woods / swamps having spread into / over towns, counties, etc.
Given a few decades, the problems will be (partially) undone, as the number of magical weapons and items will be (partially) restored. But it will likely be a century or more before the lands are truly once again stabilizied. And the problems that resulted from the destruction of unknown artifacts remain - storms, spreading wastelands (deserts, swamps, etc), wandering beasts of greater than normal power, etc. Note that this 'decades' bit presumes the effect of the major artifact fades with item, eventually allowing for the creation of permanent magical items once again. If it does not, then the PCs have irrevocably changed the world for millennia to come.
