I always remember the big fights close to the beginning of the wipe being the most fun. Casters weren't nearly as useful, but were brought along because they were better than nobody at all. The fights lasted many more rounds because no single character could do enough damage to quickly kill another. Caster area damage was minimal, a mage with color spray would be feared as a vicious area caster!
Not sure I completely like this idea, but how about putting PvP damage on a separate scale from PvE damage? Make PvP damage match up to some sort of log scale, additional +damage and higher level spells would do more damage, but the more +s any single character has, the less marginal advantage it would give. The specifics would need to be tweaked to make it work well.
The other issue I see is that later in wipe casters have a huge power imbalance versus later in wipe non casters. I don't know that casting level really made a huge difference in this.
What about making spells themselves be tied to actual items? To be able to relocate you need to have the magic hat of relocating. Make the hat limited or not depending upon the spell, have it decay as a normal piece of equipment. Maybe make some hybrid system where the bottom half spells are books that are acquired as now, and top half spells exist as equipment only.
I would also seriously consider just eliminating or severely toning down the effectiveness of all area spells / skills. The only real disadvantage I see to this is it limits the ability of a smaller group (say of 4) trying to take down a larger group (say of 10). Maybe leave the only area effects that exist as currently in the game as consumable wands or items?
Quite honestly if beginning of wipe balance could be maintained for most of the wipe, with only the ILLUSION of character progress existing to provide some motivation for continued PvE exploration and zoning.