Just an example.
In my PBP game the thorny trail, while the challenge is to make characters without spells per day, optimisation is cranked up to ''high'' and the player's are let loose on everything they can find. They are all highly optimised character, and i think a level 10 Ling Ling in that game actually pulled a 350 damage in a round, at level 9.
As a DM, i am in no way threathened by their power level, and feel confident i can challenge them by optimisin, but a bit less then them, for instance, i could pit them agaisn't a smart wizard with good defenses from good spells, like displacement and greater mirror image, it's not some celerity busing bullshit, but it's not crappy, and i feel confident they will succeed.
The DM has the final say on what he is comfortable with.