All of these are choices for the individual table. I find "Whatever ruling we decide applies to PC and NPC alike" tends to stimulate a very reasoned discussion as to whether a specific ability or combination should, or should not, be allowed, and how it should be interpreted.
And such a discussion is a good oppurtunity for further development of the game.
Often such discussions seem to start because a spell is considered too powerful or broken outright (at least in the groups I played), cheesy magic items came next (like the Animated Tower Shield of Adamantine Cheese used by a greatsword-wielding fighter), then cheesy classes (like the Radiant Cheese of Pelor, or the Morninglord of Cheese).
Playing all spells by the RAW is a very tough challenge for DM, IMO. IIRC, somewhere in the basic rule books (DMG?) it says that the DM can't cheat. If a spell seems to be OP, the DM also has the option to improvise in order to tone down a particular spell's power to keep an ongoing encounter interesting. Creativity is part of the game, and the "rules" are more guidelines, IMO (and I think this was mentioned in the DMG as well). If all players at the table agree upon that, discussions upon that "rules"/spell topic should be short.