Hello Baardvark,
personally, I don't care much about legendary items, but I fully understand their appeal (it's the basis of skinner box). I don't think, as you say, that an RPG would fare well financially without such system, so I just roll with it. In my first playthrough, and as I mentionned, I played the skinner box game.
I didn't say I would limit the characters to two or three skill tree, but that I would limit the amount of point spent in them to two or three points maximum (instead of the current maximum of 5). As this would cap skill tree very quickly, characters could spend their many points elsewhere (spread), which I prevent in some sense by, as you said, forbidding overlapping skill tree. This also allows the prevention of spamming unbalanced skills in one round (you could not cast multiple fire shield in one round, if one decides to keep using elemental shield, for instance).
And after reading your last two paragraphs, it dawns on me you might be talking in a thread that doesn't concern you at all? In your whole post, nothing tells me you are talking about challenge?
