I agree with you on the point that there must be balance. I think that if a way can be found to balance the various assortment of weapons and defences in the game, we won\'t have to worry about everyone being archers, or everyone being greatsword-wielders.
Plus, I think that the system should be based on skills as much (if not more) as it is on items. While a high quality staff could be both a magical enhancement and an effective weapon, a character with a high level of intelligence, but not very much dexterity, will gain a magical benefit but will not be able to use the staff as an effective melee weapon, and vice versa.
Shields are also another example of dual-purpose equipment. They can be invaluable for blocking both melee AND ranged attacks, plus, with the proper training can also be used as an effective weapon in battle (smiting an enemy with your shield, for example). But does that make shield so powerful that we should take them out of the game? I don\'t think so; as long as it can be balanced with skills. In order for a character to be able to wield a shield with such efficiency would require a lot of training and practice, and I believe the same could go for staves as well.