Lucius, your argument can only be valid within the particular magical theory of yours. Even within it, it\'s still flawed, because:
once science has created something, magic could change the forces of nature that make it work, right. However, it doesn\'t need to. As you already said, magic _can_ alter all rules of physics. So why could it not be used to _improve_ the effects that the scientific device relies on to function? This is the same alteration of natural laws, but it will enhance the scientific device quite a lot.
Example: torch.
Conventional, scientific torch: creates heat and light by oxidation process
Magically enhanced torch: uses same oxidation process, however emits all energy generated by said process to output only light.
Therefore, the magically enhanced torch will either output _way_ more light than the conventional torch, or can burn way longer with ame light output as said scientific torch. Or be much smaller.
Side-effect: it will not burn you.
Same thing in reverse: heat-only torch for all the infrared sensitive eyes out there: light that can only be seen by you (well, at least by fewer people and monsters)! Cool? I think so.
These same effects can, as I alradsy said, be created by magic alone, but this magic would need to be much more powerful in order to achieve the same effect.
This can also be applied to more advanced tech, even to current SOTA - tech like microprocessors: by eliminating heat output of transistors you can make them way smaller, faster and don\'t even need a heatsink anymore.
It is only a common way of gamedesigners to simply define that the higher the scientific refinement of any item is, the harder it is to apply magic to it. This has, however, no more validity as saying that magic cannot exist at all, probably less.
There also are game systems that even have specific magic to influence scientific devices! (ShadowRun, for example). Therefore, it\'s really just a question of the ruledesigners\' ability to integrate science and magic, and only if they fail to, they need to resort to artificial limitations in order to keep their concepts working.
Why? Because MAGIC CAN DO ANYTHING! Why should it be limited to non-scientific devices only? After all, the most scientific device still obeys the same rules as, well, mud. No difference, you could even have a whole scientific theory of mud, create completely artificial mud. Would this mud than be excluded from being influenced by magic? I don\'t think it could be.
As for the steam-powered tanks: I liked Army of darkness, but I\'m reluctant to believe that even this (primitive) tank would have worked IRL, because of the weight vs. power problem. Maybe it even would, but I don\'t know, really. It would take a steam train on wheels to have enough power to run through medieval countryside, and it would most likely simply get stuck / sink in the first muddy field it happens to encounter. Medieval countryside was either very wet (-> mud), rocky (-> mountains) or sandy (-> desert). The steam tank could cope with mountains if it were not that mountains are somewhat unsuited for large / heavy vehicles.
As for swords vs katanas: scientific theory comes from observation. Afterwards, the resulting theory can predict effects not easily observed. So the katana was made using the observation that grinding it repeatedly will improve it, without scientific theory. It also could be made lighter than a sword because it was more durable. I don\'t know weather they knew it was because of the resulting structure or not. I thought they knew, but if you say they didn\'t, I accept that.
When blacksmiths applied layered metal, they maybe had scientific theory, OK. So the advanced swords were scientific. This would, in your theory, then prevent them from being magically enhanced, while the katana could be, because it didn\'t use scientific theory?
The mixing of stell and iron IMO is also just an observation or the product of experiements so it\'s the same as the grinding of katanas: applied obervation, not scientific theory. And I\'d be surprised if the makers of katanas used any iron they happened to come across, or just threw it into a lake to cool.
Still, I believe that even the most advanced swords were crude compared to a katana. However, katanas were not easily created (years and years for creating a single one, IIRC). Seeing that I don\'t know weather or not any of them had any scientific theory as opposed to observation, further arguing on my side would be pointless.
As for your strength-enhancing armour powered by steam: I hate it. Anyway, it will not work due to lack of water (tank can only be tiny). Furthermore, it will not work because it\'d be too crude unless you imply modern-tech valves and pressure- powered actuators. IOW, it would be bulky at best. Not to mention that it\'d be kinda warm to have a nice, cozy fire burning inside your backpack all the time, while pipes (made of metal, I presume), filled with ~90?C - tempered water or even hotter steam, run along your body! Of course, you _could_ insulate the temperature, but this would be a matter of extreme bulkiness. It would add to armor, though...
Well, UNLESS it\'s enhanced by magic...
Ineluke: The flying _race_ would be Klyros. They won\'t be good for riding, because they\'re weak. There are flying animals that are meant for transportation, however. And the use of flight outside of the city would indeed be limited because there wouldn\'t be anything to fly to: the other places are behind walls of rock, are tunnels, whatever. The only use would be for fishing because one could more easily access far regions of the lake, but it\'d not warrant huge transport ships.
