The problem lies not in the Prestige Class system, it lies with poorly designed prestige classes.
No spellcasting PRC should, really, give +1 spell caster level every level, for instance. Unless there's nearly no other benitif. Wizards and Sorcerers have too little to loose. Loosing some familiar progression and a wizard bonus feat or two is rarely any real loss, particuarly if there are some especialy cool powers in the lower levels of the class.
Likwise I need to wonder if the loremaster was most likely a bit of a mistake, simply as a poor example. A wizard will typicaly give up nothing for this class (you'll get the skill focus feat back, in the long run), and a sorcerer or cleric will make a big sacrifice.
Melee oriented prestige classes are typicaly a bit more commonly balanced, since they will usualy have a handfull of special abilitys or some bonus feats, but not both...
The real key is making sure the class is honestly giving something up, in order to become more specialized. If they just gain more cool abilities, the're simply better.