Enough of the into-ramble. Straight to the point then: I can see two main ways of playing warhammer. Given that I believe I'm making this catagorization for the first time, I'll take it on myself to name them: the Challenge Game and the Conventional Style. Of course these are not the only styles, but certainly in our own group they are the most popular styles played.
Generals easily have 200pts of magic items; everyone has a fourth level mage (or fifth if allowed) who is often well equipped; powerful special characters are common. Usually the regiments will be drawn from the elite forces, who usually provide the best value-for-points. The characters (when not mounted on a monster) are included with the most powerful unit to make an almost unstoppable killing machine; almost unstoppable, because the one thing which can stand up to a force like this is, of course, the opponents equivalent! The rest of the army usually consists Mainly of relatively cheap, quirky models and items like Bad Moon Banner equiped goblins, Black Gem armed champions, Volley Guns or Bolt Throwers, Hearts of Woe etc. These are things with some special ability (eg ignore armour save) which can be very dangerous in the right situation (eg against Chaos knights).
With a Conventional Style army, selection is not critical. Nearly any troops can be put to good use, even if its just decoy or harrassment. Magic item selection shouldn't matter very much; if it does you probably aren't playing true Conventional Style. Items and allies are taken to fit with the accepted feel of the army, and no-one will bring anything too powerful. Some measure of self restraint is necessary; what the rules say you can have and what you can take and keep to Conventional style are not the same, but as there are no rules to restrict you so you have to restrict yourself. For example, in my conventional games using Empire forces the Steam Tank usually stays on the shelf, one Volley Gun is all I ever want, the High Elves who come along to help me every game never borrow a Repeater Bolt Thrower and the Supreme Patriarch always stays in the box, regardless of how many Treemen my opponent might have.
To summerize, the Conventional Style army should be largely composed of conventional troops. For example, with Empire this means spearmen, swordsmen, and archers rather than Flagellants, ogres and Outriders. I DON'T mean by this that these special and elite troops should be left out of the Conventional game; in fact they will probably be a vital component in any army. What I DO mean is that these should be treated as special and elite, instead of being the norm as they are in a Challenge game.
Beyond setup, movement and timing are critical. You have to manouver troops to get into position to charge, shoot, flank or just plain avoid other units. This is the crux of the Conventional Style strategy; the aim is not to achieve victory by having the most potent combination of magical weapons, nor to achieve victory by having troops and characters which are better value-for-points than your opponent. The aim is to manouver your troops so that they can engage the enemy on their own terms. Charge with knights, defend with spearmen; in a Challenge Style game the specialities of the different troop types are usually overshadowed by the power of the characters in the units. Time your attacks so that you can attack in the flanks the next round; in a Conventional game the panic test and +1 to combat resolution actually mean something. See if you can get that unit of light cavalry behind the enemy lines, rather than just dumping a wyvery down on the war-machines. Setup and overall plan must include provision for lines of fire for missile troops and war-machines, and the positioning of the general and battle standard should be to maximize the use of their leadership rather than to maximize the damage they can do in combat.
Firstly, powerful wizards don't really belong in a Conventional game. A powerful wizard can be more dangerous than a powerful general, especially if a higher level that all other wizards in the game. That said, I must add that powerful wizards usually cancel each other out, and they don't eclipse everything else in the process (except lower level wizards, of course). The main effect is often simply to use up lots of points and reduce the army size! Playing with lower level wizards does help to a degree, in that you have less spell customization (and more troops to use with the saved points), yet even low level mages can domainte. The problem comes in part from the Warhammer magic rules; a Flamestorm summoned by a level one wizard is every bit as destructive as one summoned by a wizard lord. You'd be amazed how much damage a Light Mage Champion can do given a free run; I was. In fact, if you play with level restrictions but spend the same number of points on wizards, you can actually make magic more powerful. This is because you get more spell cards, and can cast more effectively; how many times have you had to throw in power cards because your level four mage has no appropriate spells?
In a Conventional game magic should be used to assist the rest of the army; reduce numbers, stop units from moving in to attack flanks, protect from war-machines etc. Its not there to blast entire units (or armies) out of existence; this is what you do in a Chalenge game. The number of defensive spells is actually quite limited (I reckon we should make a few up), but some of the offensive spells are very deadly. Admittedly, in a Conventional game powerful offensive spells can loose some of their edge, because there isn't the concentration of points that there is in a Challenge game. Even so, a few suggestions if you find that magic has too great an effect; take out the Total Power card, take out the power three spells, play with magic level limits and mage number limits or take a few power cards out of the deck to increase the proportion of dispels.
In the above scenario you have three or four wizards on either side, with levels appropriate for the size of the army. Hopefully they will have a variety of spells; Empire is the perfect example. They have to try to eliminate other wizards, while at the same time help the units in the army and try to inflict casualties on the enemy. I suspect the key points are to keep the number of power cards down below the number of useable spells, and to make wizards targetable. Then, as a player you have to compromise between slaying other mages, which will give you an advantage in the long-term, and attacking other units or defending your own. Do you have your Celestial wizard Lightning Bolt the enemy sorceress leading the spearmen or should you get your Light mage to the entrap the horsemen who are attacking your cannon? Or use the power cards to defend your general from those bloody Wardances? If you keep the winds of magic low, or increase the proportion of dispels, then this idea shouldn't really increase the influence of magic on the game. What I think it will do is introduce more decisions and more excitement than having a single level four wizard who each round will usually be restricted by range, power cards numbers, lines of sight and enemy defenses to a choice of one or two spells; a mage who can only effect one corner of the battlefield and only fight other wizards if he has a Total Power card. Perhaps I've been hanging out with Brettonial Quest Knights too long, but surely it makes more sense for wizards to be able to fight each other than forcing then to always target the most defensless units in the opposing army?
Firstly, many gamers (drawn from a non-existent survey of our group, WD comments and a quick squiz at the Net) seem to think that there is a "correct" or "best" Warhammer style. Some people consider that, for example, powerful special characters should be left out of games, while other gamers use them every game and wonder how anyone can play otherwise! I don't believe there is a "correct" style; the style to play should be determined by personal preference and how you feel at the time. In short, gamers should play the style they enjoy.
The second point I have to make is this: I have outlined two styles of Warhammer, the two I have seen played the most. The Challenge style and the Conventional style are both valid, but they are NOT COMPATIBLE; I don't believe you can have one player Challenge style and the other Conventional. This is not because the Conventional style player will usually loose (although he propbably will), but because the etho's (ethii?) of the styles and attitudes of the players will clash. One player will think the other unreasonable and the other probably consider his opponent rather inept. From my own experience, you get the most enjoyment when both people are playing the same game.