A'koss said:
It is "expensive" (mostly in an attrition kind of way) to get PC race into the high levels, but once there, they are ridiculously cheap for what they can accomplish and entirely self-sufficient.
If they are stupid, yes, they are cheap. But the DMG notes that NPCs aren't just stat blocks that cast spells for gold. They are people. Despite what the DMG says about the cost of spellcasting, the negotiations are more likely to go something like this -
King: I want you to lay waste to my enemy's capitol city!
Wizard: Yes, I can do that.
King: Good! How much will it cost me?
Wizard: Half your kingdom.
King: What?!?!
Wizard: Better yet, give me half your kingdom, or I'll lay waste to
your captiol city...
This is part of the "difficult to use" portion of HL characters as weapons. The leader who uses them is putting himself in danger of using a weapon that will very likely turn on him. When a cannon goes awry, it kills it's crew. When the HL caster goes awry, he takes the throne...
A single HL wizard flying high above a city, at night, under the cover of improved invis. and mind blank could rain unholy terror that would decimate a city with impunity.
I think your HL casters need to look up the definition of the word "impunity". Yes, he'll be hard to reach in the middle of the fight. But a character with an 18 Intelligence or Wisdom will take a slightly longer view.
Let us say that a caster performs such a service. He'll destroy the city, but he won't touch the HL casters that live there. This effectively permanently costs him an 8th level spell slot, as he must now cast Mind Blank on himself every day for the rest of his life if he wishes to avoid retribution. [Note on costs- if the caster expects to live another 20 years beyond this fight, at 1240gp per casting, this adds about 9 million GP to the cost of the service.] And that's no guarantee. Mind Blank won't protect someone finding out who did it and where they live by the mundane expeidient of spreading around gold and asking questions.
This is not to mention the risk to the leader who employs such tactics - you think his enemies won't have it in for him, right quick? What's the point of destroying your enemy's capitol when you know that means some magical assassin will come along and kill you and your entire bloodline?
...I could easily see a world in ruins after years and years of HL wars involving PC races, powerful, intelligent monsters and spawn-creating undead.
Go watch the movie "War Games". The fact that you can imagine it is exactly why it won't happen. In the real world we already figured this one out with nuclear weapons, and the majority of us don't have the Int or Wis of a high level caster. It's obvious that nobody wins such a conflict, so you don't start it. There's darned little point to destroying your enemies or taking over the world if you have to turn the world into a wasteland to do it.
Okay, so the spawning undead might (and that's only a might) still want to destroy the world, but they have the power of pretty much every other intelligent creature in the world against them, and that seems like a reasonable balance.