D20-Designs: Changing the system

OK then, with the continued designing of the magic system, some more relevant facts are emerging, and I just want to get a general opinion on some of them. First off lets just start with some basic descriptors for spells. by this I mean categories that spells fall under that are niether the elements involved in making up the spell, or the school of magic.
Mind Affecting: spells that are cerebral and specifically affect the targets mind
Spatial Manipulation: because of the increased number of such affects, this replaces an expands the previous of teleport
Binding: An negative affect laid upon a person with a duration
Ward: a protective affect laid upon a person with a duration
Veil: a subtle affect that in some way conceals something
Energy Affect: an affect specific to a kind of energy, as opposed to element
Phantasm: same as previously
Pattern: Same as previously
Figment: same as previously
Glamour: same as previously, usually a veil of some sort
Charm: a spell that can or does craft a sort term magic item
Craft: a spell that cvreates a permanent enchantment or affect on a person place or thing

-Based on class, a progressive bonus to ac as per level
-Armour granting damage redution based on rather realistic interpretations of armour and DR
-Increased levels of craftmanship and item quality. An attempt to simulate essentially the power of elven craftsmanship: aka when detect magic is used on boots of elvenkind, nothing shows up.
-A COMPLETE overhal of the magic system using elements from WOT, Arcana Evolved, Psionics handbook, and both Original ideas of mine and historical references. Spellcasters will not be reduced in power as one might think. rather, everything else will go up a little. However, the practise of magic will be complex and very costly. The specific elements of the magic system I will list afterwards.
-an exspansion of the skills and the uses for each skill, making them a larger part of the game, both in and out of combat.
-A system of measurement for non-combat encounters of both a mental and social type for the purposes of progression and a way of stating out such ncounters
-an expanded feat list, introducing a new take on meta-magic and advanced complex manuever's
-a re-working of the base classes, removing some, adding others, changing others.
-And yes I know what im talking about to the point that I understand the I am going to have to overhal the system at large. Re-writing all the monsters is going to just a peacy old time.
at which point in time the magic system changes are numerous as well:
-division into the eight schools is a little bit farther. since each school is a representation of a different kind and indeed a different style of magic...You dont necessarily know all of them. each casting class astarts with a number known of there choice, and it requires a feat to learn a new one.
-division of the system of magic into five elements: Air, earth, fire, water and Prime. works similar to the schools. however, unlike with schools, you cant ever use a spell unless you have all its elemental sources. you can without the school, its just weaker and more of a pain in the ass.
-Application of what called 'Mystical' feats, which are feats that modify something about a spellcaster or his magic, but not in a way like meta-magic. things like spell focus and spell mastery would be the most primitive examples.
-Magic Item creation is now run by Usage of higher level spells called rituals.
-A spell no longer is neccessarily of a specific level. most spells, though not all, will be able to be cast at multiple levels, creating a different strength of effect. For instance, the maximum lift for a 1st level telekinesis is 25 lbs. for fifth level it will probably be 4-500 lbs.
thats all I can think of right now. but there are many more, though minor by comparison

First off, for my D20 mod, I'm not actually planning on wiping out magic items at large, but damn well coming near. Wizards and other spellcaster will have the ability to craft magic items as before, but the cost is greatly increased, as is the amount of time required. Magic items will not normally be something anyone other than a spellcaster will have, or if they do they will probably be a very minor effect.
The Types of Magic Items:
CHarms: magical items of a variety of types that usually grant small or negligible bonuses. charms have a limited life span and eventually lose there ability.
Talismans: talismans are magic Items used by spellcasters or those of a sorcerous lean, to enhance or modify there magic. they only work when used in a specific manner, and only when given a source of power, such as spell slots.
Fetishes:Shamanistic items linked with the spiritual world. while not actually magical in nature, they are items strongly valued by a spirit or spirits, and as such are primitive ways of negotiating with these entities.
Potions: Generally the same, though much harder to create. come in many different medium forms
Wands: generally the same, only much much harder to create
Bonded Foci: a principal focus of ones arcane power, used to focus and amplify that power. a concentrating force which adds some oomph to ones spells
Artifacts: Major bad-ass powerful magic items.
Scrolls: same.
Athame: the weapon of a Rune Knight. so completely different.
Wonder:a magic item with an enduring power. very rare, very difficult.

Spellcasting as is has been greatly redone, to the point where it is a genuinely different system, so much so that even bossmustang may even enjoy playing a spellcaster or two.beware, much more diverse, slightly more complex, and capable of so much more.

Im Getting to the point in my modification of the D20 system, where its starting to seem like a serious project, so much so that i've started a community to talk about the stuff. However, I'm starting to realize that the changes im making here are getting kinda ridiculously significant, so Here's my question:
When I remove Magic Items at large, what are the things you guys think I'll need to do to counteract the loss of balance?

As the first question posed to my current all of one members, I was wondering where people felt the truly important basis for a systems design lives. in Realism, or in Fantasy? This influences many different areas of the game, such as game balance and where its measured, and How much of our own world we should really introduce into the fake one we play in?