I think the races were
generally balanced, as long as you keep in mind that they're intended to be used differently. There are some races that are mediocre until fully developed, but will provide a great advantage in the lategame. There are some that are powerful early on, but will run out of steam fairly early and then only be useful for trade goods or high-end cannon fodder. And then there are some that fit in between, with a relatively early peak but still having the opportunity to develop further.
I wouldn't mind taking a gander at this one. Master's of Magic was totally awesome. I'm sitting here trying to explain it to my girlfriend and I'm reminded of just how complex the game was, the level of variety, replayability, the remarkable amount of balance between races... Suffice it to say that the game was WAY ahead of its time. That there really has been no other game that has come close to its level of complexity, or fun level or that the game has never been remade remains a mystery. The game plainly has a huge following. Its consistently rated one of the best strategy games of all time, yet nobody wants to try to come out with a modern version. Paradox never has been one to shy away from complex games, so I'm thinking that perhaps there is some hope here.
It's no mystery, and more than one company has expressed interest in making a sequel if only they could get their hands on the IP.
Around the early 2000s, Infogrames - then owner of MicroProse - decided that they'd relaunch the Master of Orion series... and if that went well, they'd consider making a sequel to Master of Magic as well. None of the original design team being still around (a lot of Microprose's core staff left or were fired while Microprose was being sold around in the late 90s, usually being downsized each time), it experienced Third Party Developer Syndrome to an extreme degree and basically tanked as a result (I picked it up to give it a go, and grew bored before completing a single game. By contrast, I still play Master of Magic occasionally today). Because of this, Master of Magic 2 never left the drawing board (if it ever got there) but Infogrames has steadfastly refused any offer by anyone else to buy the IP. Possibly because they realised they couldn't make a worthy successor themselves, but if they sold the rights and someone else
did, it might compete with their other games. Right now, it's not even clear who
has the rights - Microprose has been onsold again, but it's not clear whether the IP was part of the package or just the brand.
All in all, though, it's one example of a case where I think IP should have a 'Use it within X years or lose it' clause.
(I would recommend the Age of Wonders series, though, if you haven't tried it. It has a different set of complexities (city management is a lot simpler and individual maps are smaller in scope, but on the other hand racial relations are much more important than in Master of Magic) but it's possibly the closest of what's been released, especially Shadow Magic.)