a) Pathfinder has
this feat to allow non-spellcrafters to make magic weapons, armour, and wondrous items only. Consider importing it over to 3.5? You'd still get the basics, without getting all the wands & scrolls & potions that anyone could Use Magic Device with to simulate being a caster.
Or just make them items created by specially-trained, rare NPCs. Otherwise, I can't fathom how it would make sense for magic items to exist, as natural spellcasters like dragons & outsiders wouldn't make things appropriately designed for humanoids.
b) I like making dragons/outsiders/etc. much rarer to accommodate their higher difficulty. But with everyone having high saves, evasion, and (eventually) spell resistance, many such creatures would probably end up resorting to melee anyways.
c) I think it's fine for anything with an Int of 2 or less to not need: squirrels, worms, dust mites, and bacterium with monk levels seems a bit too much.
Other thoughts:
- The world will seem like Seventh Seas, with armour being less effective, and needing special training/focus (proficiency feat) to use any weapon (as opposed to carrying a golf-bag of weapons for every situation).
- Everyone has easy access to a non-lethal form of damage, so fights between (good/honourable) humanoids will be less lethal. As a corollary, drunken bar fights will be more lethal in general, as everyone has access to an easy form of lethal damage.
- No healing from spellcasters or potions. So slow natural healing (sped up with the Heal skill) means fewer attempted fights per day. Dungeon crawls take weeks. 7th level & higher can heal lvlx2 HP extra per day, so that helps.
- Temples/strongholds/etc. for higher level characters will have weird properties (to keep out weaker peons):
a) gaps/spires & shafts instead of bridges & stairs/ladders/ropes (speed boosts give jump bonuses, slow fall)
b) secure areas permanently flooded with toxic gas, needing to drink 20 mugs of beer or eat rotten food to be worthy for something (immunity to disease/poison)
c) for the true elites, rooms with no entrances (Abundant Step)
- Population issues: While not many people reach level 17, most of the ones that do will hang around forever.
- Skills that are cross-class, and therefore will overall be weak in the populations at large: Appraise, Bluff, Decipher Script, Disable Device, Disguise, Forgery, Gather Information, Handle Animal, Heal, Intimidate, Knowledge(Architecture, Dungeoneering, Geography, History, Local, Nature, Nobility, the Planes), Open Lock, Perform, Ride, Search, Sleight of Hand, Speak Language, Spellcraft, Survival, Use Magic Device, Use Rope.
What atmosphere are you trying to achieve with this concept? My main issue is that the Monk class doesn't have a lot of customization -- besides a few bonus feat choices, you know what special abilities an X-level character will have. The only variables are skills, feats, and equipment (which is restricted). You might as well just make a "commoner-only" campaign.