Yeah, I have to agree witht he strong majority of posters here. The DM bit off more than he could chew.
I don't mean that they players are bad, nor that the DM is bad. But an inexperienced DM is often looked upon like throwing a medium rare steak to a pack of coyotes who haven't eaten for a week. [Not by all groups, but there are players out there...]
But, what I see going on here is that there is a player (the OP) who genuinely likes the game but doesn't like DMing. He has a friend that the same probably is true for. There is a third guy with much less experience who doesn't mind putting in the extra time and generating a storyworld to play in.
Assuming that is a fair assessment, I always put the honus of a fair game on those with the most experience. It isn't right to expect the least experienced guy to always know what is fair. They might occasionally have decent foresight ... but not as much as a more experienced person.
What I find really shady about this whole deal is that the friend admits it is a broken PrC and then chooses that one when an official ruling isn't given. That right there tells me that the mentality of the player isn't about going out and having a fun (yet fair) game. The player wants to powergame with all the bells and whistles.
Now, powergaming with bells and whistles can ocasionally be fun, too - but only if the DM can powergame right back with an equal amount of creativity and foresight. But if the DM is wasting all his time just keeping up with what the players are trying to pull, that demonstrates that the players are playing way out of the DMs league. And I put the honus on the players to reign it back in.
The self-admission by the OP about the only way to contain the player is through a cube of force (which was later shown incorrect anyway because the wall of force has to be vertical) demonstrates that the players are fully aware of their power ... yet the DM may not be. The assistance offered on the player's behalf to illustrate a few weaknesses is the right kind of conversation to be having, so kudos to the players on that point. But ultimately it is up to the players to know when to lay it all out and when to reign it back in ... because they have the vast gaming experience.
The fact that the DM feels out of his (or her) league is what is causing the rash cutbacks in power. Had the players unpacked their power slowly, allowing the DM to understand their power slowly and in manageable chunks ... I doubt this would have happened. Or at least I doubt the cutbacks would have been as severe. [Although I agree ... unlimited shifting at 14th level? :\ ]
So, players - go apologize to your DM for taking advantage of him. And play responsibly. You don't want to DM - so don't ruin it for the one DM opportunity you have. Players can make DMs hate DMing just as much as DMs can ruin games and make players hate playing. If you like playing so much, I'd think you would want to treasure the apparently rare gift this DM is - in that they actually are willing to run a game!