Jonathan,
A partial answer to number 2. There are magical items in traditional sword and sorcery, but they don't fit the high fantasy mold. They tend to be plot devices (ancient artifacts that show up for one story, the only weapon that can slay the monster coming tonight to kill Conan, etc) and are taken away about as quickly as they are handed over. Their only purpose is to give the heroes a chance at victory, or the villains a nearly unassailable edge; actually achieving victory requires the heroes to be quick, skillful, smart, and a bit lucky.
If you wanted to add magic items, I would recommend using special effects rather than numerical bonuses. Fire, cold, lightning, necrotic, and other damage types; healing / harming powers; transportation effects, and so forth. This retains the wonder and style of magic without the risk of severe imbalance that comes from increasing numbers. And a sword of fire is more appealing than a steel blade because it is fire; however, if the PCs are reduced to a simple steel blade then they can still manage quite well.