Counterspelling isn't a realistic defense against hostile magics. First of all, it requires a ready action, second, a spell craft check, and third, that the counterspeller have the exact same spell that the attacker uses. Your 5th level wizard is packing fireball? Tough, because his counterpart is now throwing a stinking cloud. It's not a viable defense, it's a gamble. While the FR counter spelling related feats are of some help, they require investment in a feat chain, and usually a greater expenditure of arcane power. If a defender relies on improved counterspell, he'll be disadvantaged even against weaker casters and a wizard of equal power will be able to hit with his most powerful spells.
Also, higher level characters will probably have a few magic items. While a 5th level wizard will have between 1 and 3 3rd level spells, so he can't exactly launch a sustained barrage. However, he could also craft a wand of fireballs, allowing him to shoot another 50 blasts. Ouch.
We also need to consider the effects of higher level casters. On one hand, the most powerful casters may have no interest in fighting. They have important things to do, experiments or projects that can't be interrupted, etc. On the other hand, the services of a powerful spellcaster would have substancial allure for an embattled nation. He can kill most men rapidly, from a distance, and in groups. He may have information gathering ability that could also grant the army as whole an advantage. He may be able to remove enemy leaders, or, even better, enchant them. It would be difficult to lose when you control both sides. The poweful wizard mustn't be disturbed, yet the nation badly wants his help. Of course, there is a way to keep the wizard away from a potentially lengthy and dangerous war, and provide the nation with the weapon it needs.
The wizard could make a magic item. Any person with the right spell list can use an item like a staff or wand. That first level wizard serving in the army could properly use a wand of fireball, web, color spray or ice storm.
The country could demand a nifty magic item as a scutage fee from wizards if they're not going to fight. A wand of low level spell, a few scrolls with a neat trick that could turn a battle, a misc item that helps in other ways like a decanter of endless water, etc. While not as useful as having a high level wizard, these items would give some of the benefits, and without the risk that the wizard, not being extensively trained by the army, would mess up the battle plan or not follow orders.
An even more ambitious nation might require that archmages pay the country a useable magic item every so often, as a form of taxation. A stockpile of killing items could then be built up. Woe to he who disturbs the nation that has built up a formidable collection of battle magic over a few hundred years of peace.
Wizards aren't so great at attacking each other that they'd negate each other. At low levels, the kind of Fort save or die effects that really hose wizards aren't really around. And endure elements spells will take a nice bite out of low level evocations. Besides, you don't cast fireball to hit one guy. You cast it to kill a bunch of people. However, people would find ways of suppressing wizards. An unprepared wizard is an easy target for assassination compared to most of classes of the same level. Also, readied volleys of arrows will be lethal or disruptive to most casters - and since they can do the work of many archers with area spells, you should probably at least break even until you have a spell caster edge; and then you kick but. Higher level wizards would also be more effective at killing their weaker counterparts on the other side. Higher level spells used against lots of weak guys will cause havoc. However, the gain in effectiveness generally isn't worth the additional cost, unless the spell affects a very large area. A 5d6 fireball, or even something like sleep or color spray will probably be good enough against War 1s. Against other leveled characters, though, a good wizard will very effective. He could cause very lethal effects against mid level characters - the ones with fireball - and still protect himself against most attacks. Also, he may have the spells to burn on haste, which increases the shock value of his attacks, as well his ability to deliver spells and then move away before a suitable countermeasure can be arranged.
Even low levels of magic can have great effect. Entangle has a 40 ft radius. So a first level guy could probably entangle a good chunk of an attack force. Against an expensive, mobility dependent force like calvary, entangle could be devastating.