Anyone coming in here looking for a fully formed set of magic item house rules will be disappointed (at least for now) because what I am posting here is more of a nebulous idea that came to me as a solution that might just work. If something similar has been suggested before, I apologize, and ask that you point me in the direction.
So, the major issue people have with magic items is the dependence on them, the "christmas tree" effect so to speak. People feel that their character's ability should be only tangentially enhanced by his material goods, with their significant ability coming from the character's natural talents.
The major problem is that it seems there is a dependence on magic items for many classes, especially classes which rely on martial weapons for damage. Maybe Fighters need powerful magic weapons to get past DR and deal acceptable damage, or perhaps the Rogue needs a Cloak of Resistance to have any sort of acceptable saving throws. Without these items, many characters would be underwhelming and unable to compete with monsters of the appropriate CR.
So if the problem is the reliance (across classes), on magic items, why not tie the bonuses that magic items grant to the character's advancement and not to the item? That is, something akin to the character level feats, but on a separate track, with separate bonuses. I'll call them, uh... Character Boons, or just boons for short.
The basic idea is that, in a world with these house rules, many-but not all-of the magic items that the standard Pathfinder world possesses are missing. Magic Weapons, Rods, and Pearls of Power are a rarity, if they even exist.
In order to account for this, as characters levels up, they gain Character Boons. These boons are much like feats, in that they are gained by every character as they level up, at the same point in time in each character's level progression. Instead of feats however, characters use these boons to attain abilities which directly replace those lost by the absence of magic items. For example, perhaps the most common boon would be a +1 to both attack and damage rolls, to replace the loss of common magic weapons. Or maybe a boon could be an extra spell slot, to replace Pearls of Power. Any number of magic items that may be seen as necessary or even just universally suggested as useful to the play of a character could be selected as boons instead.
So envision a level 10 fighter. Instead of his +2 longsword, Belt of Giant's Strength +2, and +1 full plate, he has boons: +1 Weapon (longsword)*, +1 Strength*, +1 Armor (full plate). Well, in addition to his non-magical longsword and his full plate.
The idea is that both characters would be mechanically the same, but are built for different styles of world.
Now, obviously magic enchantments aren't all equal in power, which is why they aren't all equal in price. So this is where boons would need to make a second distinction from feats. Instead of being purchased equally, as feats are, one would instead purchase these boons with some sort of point system. For now I'll call them boon points.
Boon points would be gained equally by each character as they progress, much like feats. They would be used to purchase boons, very similarly to how gold would. Instead of being material, though, they would simply be an abstract game concept whose only real interaction would be with boons.
The question arises how many boon points certain magic items should cost, and the simple answer is that it would be based on the gold price of the magic item. Perhaps the numbers could be somewhat simplified, so that one only needs tens of boon points rather than thousands in order to purchase an item. This solution helps answer the problem on how to allocate boon points by level. The obvious answer is to base it on the wealth by level charts, reducing them in an analogous way to the prices of each boon.
Now there is also a problem that certain magic items don't seem like they should be replicable by an increase in abilities. For example, a Fighter who gets so good at combat that he can cause his sword to deal fire damage seems somewhat strange, at least in some contexts. For this purpose, I would say that enchantments and items such as this should be left as items, if possibly rarer. The goal, remember, is to abolish the dependence on items, not abolish all magical items whatsoever. Thus, flaming swords, ghost touch arrows, and many wondrous items could be left untouched by this system. This would of course mean that some sort of wealth by level should be retained, though for the sake of these world it could be restricted by availability rather than by literal gold amounts (in items) owned by each character.
Item creation would be somewhat more difficult to convert, though it has always been something of a monster in my opinion. I'm not sure what to say about it yet, but as you can see the idea is still prenatal.
What say you forums? Is my idea worth following through with? Is it old hack? Is it just such a bad idea that you need to post about it? Do you want to help me?
It is certainly worth considering. There have been alot of such ideas floating around. I am using a somewhat simplified version of this in my current campaign (heroic distinctions first mentioned here along with some additional bonuses to round things out spelled out here)
I played a game where anything other than one shot items (scroll, potions) cost double. It was quick and easy and worked out really well.