For those games where the only magic items (or the only cool magic items) are given as treasure by the GM, restricting magic can still be challenging. How do you give them stuff without giving away incredible power? Here are a couple of ideas I had:
Give them winged bracers. This gives them the gift of flight, but they cannot use their arms while flying. Sure they can scout, but they cannot swoop in and hack with a sword. The concept is that trying to fly and fight would be like trying to fight while kicking with both legs - You are going to wind up on your butt!
A magical item that allows you to grow to giant size. Instead of giving the puny human giant strength, make him grow in order to get it. That can be a restriction in and of itself. Furthermore, the body cannot take the strain of becoming huge all the time, so there is a “cool down” between uses of the giant sized abilities. You could have the cool down based on Endurance, where a higher Endurance had a shorter cool down, but I think it would be more fun to based it on Willpower (or Wisdom or whatever) How many warriors do you know with a ton of Willpower?
The magic item has trapped the spirit of waterfall off Mount Kickapu. In order to access the item’s massive water based powers, you must first attune yourself to the spirit, by going to his home atop Mount Kickapu. I like the quest driven magic items. Another is to give them a minor powered sword, but if they plunge it into the eternal flame on the altar of Rsnefaria, it will gain far more power.
The challenge is always to give the bad guys stuff that the heroes have to fight against without necessarily giving those items to the players after the game. Maybe they’re not willing to travel to Mount Kickapu. How many encounters does an enemy giant man have to last? One. How many does the PC need to survive? Lots! Therefore limiting the item’s activation grants more power to the enemy than it does to the player.
Any more ideas?