There have been constant threads about "If magic is so powerful and there's so many mages, then why doesn't [insert something more modern here] exist/happen/etc?" This setting seems to be taking that, and DOING it. I find that it doesn't hurt the suspension of disbelief, but HELPS it. Why? Because think of it this way.
Can't say I've noticed the "constant threads" that you're referring to, but I will comment on why I disagree with your assertion. It's because, at it's heart, D&D is trying to simulate a genre. Sometimes it fails (paladins and assassins casting spells etc.) or exposes nonsense parts of fantasy (why don't monsters destroy towns, why not use magical lighting everywhere etc.).
But I think it is a huge mistake to take that as a reason to put the cart in front of the horse, and say that because our simulation sucks in some ways or exposes nonsenses in S&S fantasy, we should make the setting reflect the nonsenses and failures of our genre and system in order to make it consistent. It leads to a crazy setting where D&D's idioms
and sword & sorcery fantasy's idioms are magnified and dwelled on until the cat chases it's tail, and that which was supposed to be simulated becomes irrelevant as the simulation begins to define it instead. This leads to designs such as the 3.5 prestige classes that have names and no archetypes, and are there because of a failure in the rules, another example of the cart put in front of the horse.
It's more difficult to ignore these idioms as of 3E because they're spelt out in greater detail (X number of wizards per town, and explicit magic item creation), but they should be
ignored if one can, IMO, not put up on a pedestal and have all they imply extended until it defines the setting more than what they were originally trying to simulate does.
(I hope that's intelligible; I'm having difficulty getting across the concept because it's a little convoluted, but hopefully you can make sense of it.)