It is fully intentional that magic users are very, very powerful in the world of SpellMaster. Frankly, I find the AD&D type wizards boring and uninspiring. You study for years in order to do what? Open a door and light a campfire? Yeah, right.
SpellMaster is a PvP game, not a PvE game. Yes, after some time mundanes will not be worthwhile opponents anymore. Never completely underestimate them, though. There are assassins, poison, siege engines - with great power comes a great number of determined enemies, and humans can be very, very creative when it comes to killing. We're not on top of the food chain for no reason.
But your main opponents will be other players, and that is intentional.
As is the power-trip. SpellMaster is one of the few games in which you can play a really powerful character, because we don't even try to balance wizards with fighters and thieves.
Ah, seems I misinterpreted your intentions regarding where you wanted Spellmaster to go. I thought that since quite a lot of background information focused on magic users being outlawed in most of the "civilized" world, the central conflict was going to be between the Witchhunters and the Mages, with PCs playing both sides. For what its worth, I'd probably prefer that kind of setting because of the greater moral ambiguity, but you're the GM.
On the enchantments topic, my suggestion is to divide it between enhancement spells (which only work for a limited time) and creation of actual magic items (which has to be done via rituals). So I may be able to cast the spell "Flaming Sword" (Enhance/Fire) and wander around with a flaming sword for an hour, or I could spend six weeks performing a ritual to create a "Sword of Fire" that always works.
