I have had to deal with a munchkin or two in my day, but I have found that the best way to deal with it without attacking the munchkin is to subtly "change the carrot" - instead of offering power in the form of the bigger, badder magic sword, offer power in the form of connections with the king, noble titles (and the associated land and income) and so forth... (see my "change the smelly carrot" thread). Suddenly, the munchkin realizes that his awesome sword isn't nearly as powerful as the army his less-adept-with-a-sword-but-a-great-diplomatic-and-leader-type friend has.
Munchkins *are* great for gaining an understanding of the rules, I will grant you that, but if you want an extended campaign with them, it's best to help them overcome these tendencies... after all, the concept of the "bigger, badder sword" gets stale for most of us fairly quickly.
--The Sigil