Well my approach may be a bit different than a lot of others but I like to start up a game where pretty much everyone has the same abilities, same items, same probabilities for drops etc. Flesh out the basics and get the game up and running with virtually all the same character.
This is going to guarantee that all players vs players are the balanced because they are all the same character. This will also make it easier for you to balance a player against the environment because you are troubleshooting and tweaking one player (fixed type) against the changing world.
Once you have this all setup, then you can go about tweaking slowly and surely and all the meanwhile you can have players playing.
So lets say I created a warrior with 20 strength, 10 magic, and 50 health. I create the one class, test him against the environment and see how that works out. If he is handling his own fairly well, you strike your balance. Then of course if all your players are warriors they start with the same stats and health so the difference is pure player skill.
So my player vs player is currently dead even. The player vs the environment is now tweaked. Now I take the warrior and slowly tweak him to have less health and strength, more magic. Maybe 15 strength, 45 health and 20 magic. I now call him a mage and put him (with the warriors) into the world for the players to try out. The thing is that the mage is not radically different than a typical warrior and since he is not that different he should handle the environment roughly on the same level as the warrior. Maybe I take my warrior and tweak him into a rogue by boosting health, lowering magic and pumping into dexterity and put them in with the warrior and mages. Now I have three classes all from the basic base of a warrior but with slightly different abilities.
The idea here is that we are mitigating the variables and starting from the middle instead of trying to start several characters that may be extreme opposites of one another.
But know this, balancing is always a tweaking game and you do have to let the game play out and see what works and what doesn't. But if you start from the middle and branch out rather than trying to start from the outside and balance it to some environment in the middle you will be better off and it has worked for me.
Same with items. Create a sword that will have some basic features and branch out to ones that have a little more damage, maybe more durability etc. Watch your favorite online rpg games. You will see that their new weapons are often times recycled base weapons plus "extras" that make it a little better than what was out there before. Often times they even attempt to sell players on items that are "a little better" than what is out there. Knight Online is notorious for this and their "upgrade scrolls".
This post has been edited by Martyr2: 10 Nov, 2008 - 11:26 PM