Mustrum_Ridcully
Legend
Which obviously indicates it is a balance issue - the PCs are more powerful then they normally would be, and thus can survive situations where they normally would have failed. You have experienced your "breakdown" right there.M
I've got to ask why are there these limits? Is it a balance issue? If so where does it break down? It doesn't seem overpowering to me unless you are draping your PC in magical gear. My bad guys all have the ability to use their best powers over and over thanks to recharge, as long as you roll the right numbers. We've not played with the limits before now (b/c we overlooked the rule) and the ability to use more than 1 daily power on their items has saved their bacon a few times over now, where otherwise it would've resulted in a TPK or two.

The Daily Item limit is a balance issue. The game was designed around the assumption of PCs only having a limited amount of daily items. The powers of items work under these assumption, the powers of monsters work under these assumption.
The most obvious effect that you already experienced is that characters can take more then usual.
The second effect is that magical items get more desirable to have, buy, enchant or find. Some items (particularly lower level items) more so then others.
The end result (worst case scenario perhaps, but the one the game will naturally gravitate towards) is most likely that you (assuming you'd be the DM) will send harder encounters against your PCs to compensate, and they will try to "re"-compensate by acquiring more items and better combinations of items. This will probably lead to characters being more defined by their items then their own abilities.
Note that the Item Daily limit is not _that_ hard. Every milestone, you gain one extra use. So the scenario you described where you "broke" the daily item use limit might have still worked out - it just couldn't have been the first combat the PCs have gone through (meaning the earlier were easy enough to not require magic item dailies)