Over on EN World, there is a thread about the frustrations of trying to make an effective PC wizard who happens to be a Drow.
The problem is the Drow's Level Adjustment of +2, which means that Drow of a particular number of experience points are always going to be behind several other races when it comes to class level, caster level, and the like - despite the fact that Drow have a reputation as superior spellcasters.
This is a common problem with Level Adjusted races, and it isn't the only one. While members of these races would, comparatively, be rather powerful at lower levels, their racial abilities rarely stack up at high levels. There are some exceptions - Half-Celestials and Half-Fiends, for instance, gain significant new abilities as their hit dice increase - but these exceptions are few and far between.
Even at lower levels, though, members of these races suffer some serious problems. A Drow wizard of ECL 3 has one wizard level and is equivalent in experience points to a 3rd level human wizard. That 3rd level wizard will have about three times as many hit points as the Drow. Can a first level, 1-HD wizard really be effective in a third level adventure, even if he has additional racial abilities? Maybe, but the balance seems off in some ways.
How can we fix Level Adjustments?
In Unearthed Arcana, we see rules for 'buying off' level adjustments. These optional rules solve a significant part of the problem at high levels. They don't do anything for lower level characters, though.
Another option would be to expand all level adjusted races to be like the Half-Fiend and Half-Celestial. For example, the Drow might gain additional spell like abilities... or maybe +1 caster level at, say, levels 3, 6, and 12. In the latter case, a 12th level Drow wizard would have equivalent xp to a 14th level human wizard, but have a higher caster level (though a smaller spell capacity). This still does little to alleviate the problems of low-level characters, though.
I think a satisfying solution will need to abandon Level Adjustments in favor of some other limitation. Ideally, we want something that is something of a liability at low levels but which doesn't render a character unplayably weak - while having little effect at high levels.
I don't have a perfect solution, but here are a couple of options:
1) The Commoner Route
Level Adjustment does not figure into Effective Character Level. If a race has a Level Adjustment of X, then every even level gained up to and including 2x is a level of the Commoner NPC Class. When a character reaches 3x, he may begin to 'buy off' the Level Adjustment as per the rules in Unearthed Arcana. Each level of Level Adjustment bought off in this way allows the character to replace a level of Commoner with a level of a base PC class.
2) The Level-Related Benefits Route
Again, Level Adjustment does not figure into Effective Character Level. Instead, a character gains standard level-related benefits (feats and ability score adjustments) as if her level were her Actual Level - (3 x her Level Adjustment). Thus, an Tiefling character (with a Level Adjustment of +1) would gain her first bonus feat at level 4 (instead of 1) and her first ability score adjustment at level 7 (instead of 4)., while a Drow would gain her first bonus feat at level 7 and her first ability score adjustment at level 10.