In my post on d20 Magic and Setting Design, I mentioned that magic items do not decay. That is true unless the DM calls otherwise. But decay of magic items and other methods used to prevent a tidal wave of magic items can be much more fun that just "the potion has turned sour" or "the sword loses its glow". There are four sources for this fun, two old and a couple a bit newer:

Dragon 163 has an article "Magic Gone Haywire" that is on magic items that have decayed or were made with shortcuts. It is a collection of charts, one for each major kind of magic items (at least in 1e). What makes it different from the third source is that some of the results are positive (though not in potions for some reason). It should be easy to come up with your own charts if you want to do it this way.

Dragon 229 has "Magic Miscibility", an article that is at complete odds with 3e style magic but still has some potential for limiting magic items. Boiled down, using many magic items at the same time has a negative impact on the user. Of course 3e expects that characters will be decked out with every item they can afford but it can be used for those who want to try to use two or more items in the same slot ( http://www.d20srd.org/srd/magicItems/magicItemBasics.htm#magicItemsOnTheBody ). The items should function, but they will have some rather unpleasant side effect(s). At some point (say 10 rings on the fingers, 3 in each ear and two in the nose plus armor, a helm, etc.), the character will turn into a chaos beast because of the overwhelming amount of curses they are subjected to. And of course the idea of bad things due to too many magical effects works well in OSR games.

The 3.X SRDs have a solution in the cursed item section ( http://www.d20srd.org/srd/magicItems/cursedItems.htm ). Curses in 3e represent decay as well as spellcasters who make cuts in the crafting process. If magic items can "leak" and affect their surroundings, a dragon's hoard or a vault that hasn't been opened in a thousand years will have "cursed" items as their magics interact and affect each other. Monster spellcasters can make cheap items by giving them dependancies or requirements on purpose. These aren't really curses but the result is the same- orcs with +2 human bane maces that only work for orcs or awakened tree druids with drums of move earth that only function after a sacrifice. To make them cursed to represent the cutting measures the monsters used, I would allow the dependance or requirement and apply unreliable or uncontrolled as well. They can not have their cake and eat it too.

And then there is the strange brew rules in Bastion's Spells & Magic. You can find all the text and rules here: http://grandwiki.wikidot.com/s-m13 One thing I like a lot about them is the line about how creature powers can be used as well as spells for designing these nasty concoctions.

All of these can be used in combination if the DM wishes. In any case, the lust for magic items should be seriously curtailed in settings where even the most innocuous item that detects as magic may have an unpleasant side effect.