Ok, we have decided to go for a mid-magic world (in a mid fantasy genre). What that means, as far as my understanding goes, is that magic is fairly common, people are cognizant that it exist even if they have never necessarily experienced it for themselves. Magical items are likely to be rare and special rather than used at a whim, especially consumables. Most people will not be able to use magic so readily, but for those trained for it or who have natural inclinations towards it, magic can be a powerful tool.
I'd like to get more details on how magic interacts with our world. I think the basis of this ought to be our magic system. Having a magic system will provide a foundation for us to build up the details. What a magic system basically consist of is how the magic is accessed, the basic magical tenants of the world (like laws of physics ie. "When one body exerts a force on a second body, the second body simultaneously exerts a force equal in magnitude and opposite in direction to that of the first body."). We need to understand what magic costs those who use it. For instance in Fullmetal Alchemist the magic is pretty much fueled by blood and death. In generic D+D there is no noticeable cost really, there is no real mechanic needed to access it (other than choosing spells at the beginning of the day if you're a wizard).
Also under consideration we should keep in mind the magical structure of our world. People seems pretty keen on Ghostman's nodes idea, which we hacked out a little on the other thread, also upon "the guilt that haunts" idea presented by gspRooster (at discussion found here and here respectively).
As I understand it, we have reached a point with the Ghostman proposal where we know we are going to have these magical nodes, or gates, and that they exert influence on the world. So much so that a magnetic compass aligning to the poles cannot be reliably used. Some or all of these nodes have pathways or tunnels leading to other nodes, or who knows where. These tunnels have dimensions (so can be mapped) but tend to be quicker journeys if one can handle their magical nature (I was thinking there aspect, but that has not been determined). Thus affecting trade and so forth. We need to develop these ideas a bit more and work it into our world more seamlessly. Let us do so at this linked thread.
With gspRooster's Guilt That Haunts (GTH from no on) proposal my understanding is that death (perhaps) attracts our otherworldys, which we are calling demons, and feeds them or gets them high in some manner. So like crows to carrion they tend to appear in greater numbers and stronger forms the more death is around. The demons are not existent on our world but can cross over and appear if the fabric that separates them from our world is weakened enough. We need to develop these ideas a bit more and work it into our world more seamlessly. Let us do so at this linked thread.