I got a glitch where my mana fully refilled every turn instead of 1/turn.  That game, magic was far from powerless.  In fact, it was a lot more like I'd expected the game to be.  Teleporting every turn, casting several AoE spells per combat turn, battle after battle... good times. 

The mana regeneration system serious needs re-work.  1/turn is flat out too restrictive for one of the most potentially fun and exciting mechanics in the game.

If you get a couple of cities to level 5 you can build a tower that gives you +2 mana regen per turn in each one. It adds up quickly late game.

Weapons open you up to counter attacks and you just cant screw with your enemey in the same way you can with spells though.

My fav combination when i feel like going dragon slaying is deflect and any other ability that stop the enemies next move, the earth elementals tremor works quite well and you can summon one for every one of your casters, failing that stab of ice works well against single large targets.

It can't move, it can't counter attack, you can kill anything with 0 damage provided you have the mana regen to deal with it. So yeah magic's both overpowered AND underpowered depending on where and when you use it.