The question of magic is obviously fairly core to a fantasy setting, so let's take a moment to treat it.
What role does magic play in a fantasy setting? In some settings, it's absolutely definitive. In Star Wars, the Force is by and large the point. In The Lord of the Rings, the titular magic rings are pretty much the only relevant factor that will determine the fate of the world; with the One Ring in play, no amount of military might from Aragorn or diplomatic wrangling from Gandalf could ever save the world. In The Magic of Recluse, one of my favorite fantasy novels as a child, everything is defined by the struggle between chaos magic and order magic.
Sometimes, though, magic is almost an afterthought: Conan could still be Conan without any overt magic, for instance. In the words of Penny Arcade's Tycho, "Not everyone's fantasy was to be Luke Skywalker." I guess the key to fantasy is a sense of wonder, not the primacy of any particular plot device (in the same way that lasers =/= science fiction).
I do want magic. I do! My image for magic in this setting is not of an action hero who goes around throwing fireballs lightning bolts. I like the notion of the wizard as mastermind, as manipulator, as scholar. His power is immense, but it's not about charging in and doing damage; that's what sword-swingers are for. Mages are centered around preparation, research, long-term planning.
I envision magic based on summoning spirits - that's right, those spirits. What spirits are is fairly mysterious; they generally exist somewhere that isn't here, and isn't now. They aren't conversational; you're extremely unlikely to banter with one. They're completely alien beings, and most wizards interact with them only through rigidly structured formula, which encompass all the trappings of hermetic magic: elaborate symbols, writing in arcane letters with words from languages long since lost, rare gems and materials, long incantations. By carefully using these different elements, discovered from painful trial and error over centuries and by scholars from ancient times with unknown resources, mages can summon spirits and set them to particular tasks.
Spirits can do practically anything - as demonstrated by the catastrophe - but getting them to do any particular thing is incredibly difficult. If a geometric shape in an arcane diagram is drawn incorrectly, if a word is spoken incorrectly or an alloy of precious metals isn't manufactured just so, the spirit may pick the wrong target, or do harm instead of extending protection, or just wander away and start causing chaos. That's why mages are respected, feared, and theoretically outlawed (but usually allowed if they're a) useful to those in power of b) two powerful to easily rein in). They're viewed a bit like scientists messing around with bioweapons or atomic energy: kind of cool, maybe useful, definitely not someone you want working in the house next door. Plus, all magic involves bringing a spirit into this world, and that spells C-A-T-A-S-T-R-O-P-H-E to most everyone. Most people are placated on this point by the lie - that was something different at work - but are still instinctively uncomfortable. In reality, magic may actually have had something to do with the catastrophe.
So there always has to be forbidden magic, right? Obviously all magic is "bad" in the public perception - dangerous, unsavory - but there is the idea of the good wizard, the miracle worker who heals and builds and protects. If you use magic for good ends, you might get away with some good PR. Anybody who uses magic to kill, to hurt, to curse, to destroy - even if their targets are somebody the common man wouldn't mine seeing strung up or stabbed - goes directly to being anathema, does not pass go, does not collect $200. That's small potatoes, though, to those who speak to spirits.
Spirits can't talk, see. They don't speak to people. They can follow simple instructions if laid out in the spell elements (which can include chants or invocations, but they have to be the formulaic ones that have existed seemingly forever). They can also communicate information back: some spells have them create an image, an illusion in the air or the image of a distant place in a pool. But they don't speak to us, not in our language. Some mages though, some very rare mages, speak their language,.
Even the most learned can only have brief, cryptic conversations of them, but there's a lot to be learned. They don't perceive time the same way humans do and sometimes possess knowledge of the past or future. They also perceive other things; they're widely believed to have knowledge of what happens to the dead, to the activities of the gods, the fundamental workings of nature, and other, stranger things. This lore is a hundred or a thousand times rarer than the general lore of magic, and it seems to originate longer ago, but it still exists. It is also utterly, completely anathema in modern society. Any item of lore must be destroyed, any practicioner must be dishonored, killed, and forgotten.
Of course it will have to come up.