Oh, and just in case you might think my point was to come to out-and-out disagreement:
I am a *big* fan of putting magic in the game when and where I want, in order to provide the PCs with particular capabilities or pursue particular story points. However, I think that this process is hindered, rather than aided, by the wealth-by-level MI guidelines and by standardization of item production and purchase through item creation feats and absolute market value figures. Thus, I find it liberating to tweak those figures. IH makes this easier by providing baseline characters who don't NEED a particular amount of wealth to handle standard D&D encounters. That doesn't mean they CAN'T use magic items, just that they don't need to adhere to the standard wealth-by-level guidelines / PCs-of-x-level-should-have-y-worth-of-item-bonuses components of the D&D core ruleset. To be honest, I find THOSE far more restrictive than the IH rules. Now, if your problem is that IH allows the PCs too much freedom to customize their characters, I don't really see that so much. IH PCs aren't uncontrollably customizable in the same way that, say, D&D wizards are. I find that it's much easier to gauge the abilities and progress of my current group than it was my last (core D&D with some AE components) group.
To the original poster: It sounds like your problem is more with power levels than with low or high magic, in which case IH is definitely not your cup of tea. May I suggest Grim Tales, or just resetting to lower-level PCs?