I've played/GMed in 1ed and 2ed games that had numerous psionic characters and had psionics incorperated into the setting and plot.
For 1ed, they were just incorperated from the begining in most of my campaigns due to the Appendix. They worked fairly well, since they were uncommon and you only got a few powers. This really made your character feel special if you happened to roll well and got them. Yes, these characters were more powerful, but they specifically were also more vulnerable, so it worked well balance-wise. Besides, the psionic monsters were great. Who doesn't love illithids and the gith. This worked much better than having them tacked on afterwards.
For 2ed, they started to develop that tacked on feel that they have now. I think we didn't notice it as much, because you could still run 1ed monsters and powers in a 2ed campaign. There weren't many changes that needed to be instituted. I should also note, that we just keep using the old Appendix and sometimes a supplement from Dragon Magazine whose name I've forgotten. When the Complete Psionics Handbook came out, we switched over to using it in our next campaigns. I think that it wasn't as balanced. You had some extremely powerful abilites mixed with some useless ones, and the rest of the world was wide open to mind attacks. Not to mention that the psionic combat rules were awful. We threw them out and had a set of common house rules in all the groups I played/GMed. We did have some great characters out of this version- most of them were multiclassed.
3.X. Well, I don't have the new rulebook, but I don't think it could be any worse than the last one. Almost no one has played a psionic character, and the two that I have seen were so pathetic, it didn't encourage me to try. I think this was the worst version of psionics I've seen. The starting powers and the number of them was, well, pathetic. And now, since you can't use the old monsters and the old psionics without major rewrites, you are stuck with these rules.