a party of 7, at 11th/12th/13th level suddenly get over a half a million gp worth of gear (375 k worth of it in wands), I don't care what form it takes, it completely remakes the party in a single stroke.
Two things, 1) that many wands will weigh something, I'd check encumbrance. If they have bags of holding and all that then who cares, changing out wants is a move action, to pull a wand and use it is a standard action. They do nothing else.
2) Spellgaunt, MM2 188.
They literally eat magic items. It wont kill the group but it well help get them back on track. I would have them fight one after the sell whatever ones they are going to sell. I'd have it go after the item and/or caster with the highest enchantment bonus.
But here is the problem, your last session DM gave himself the gear cause he wanted it and is planning on optimizing it. If you take it away (which is what I would do) they will most likely be upset and say that you're just penalizing the characters. I would say "yes I am, I have a quest and it requires that you don't have enough wands to blast your way through it, you almost screwed me up on it". Then it'll make them realize that putting a burden like that messes with whoever has the next turn.
If you don't want to do the Spellgaunt idea, another good one is to have them teleported into a treasure room with no exit besides planeshift (no exit, no air, meaning they got like 6 hours before they suffocate). This would make it so they have to chose between pure gold and other items that are purely better than the wands. Then have a high level wizard chase them (cause they just looted his place), or make an item cursed and control one of the PCs and attack them, or when they plane shift they end up in the middle of a battle and since they are under a full load they will have to drop gear in order to survive.
Along the way they'll be visiting a major city and have a chance to sell or trade some of the items. And, like I said, I trust them to to handle that opportunity properly.
You can also do the dicky DM move and have them sell them and then have the shop people that bought them hire thieves to steal the gold back (it is something that a PC of mine did to people). Basically he would create a Private Septum and then teach a Parrot to say Orcus over and over again at a certain crossroad, as well as follow people. So whenever someone sold a bunch of stuff I'd have the Parrot follow them reach a crossroad and then summon the demon lord who would slay the person. I'd go get my stuff plus back.
