The setting that springs to mind is Hellfrost. It is based in the realm of Rassilon, a fully detailed world with an extensive Gazetter and Bestiary in addition to the Player Guide. The world is varied and interesting, with plot hooks liberally sprinkled through the published literature, and although it adheres to many of the common fantasy tropes, there are sufficient twists to keep things interesting. This is partly because of how heavily it draws on Saxon and Scandinavian history and mythology. Also, the setting can cater for many different styles of campaign from dungeon delves through political intrigue in the Magocracy and heroic quests to relieve seiges on dwarven strongholds.
Addressing your criteria specifically...
Magic items are special
There are three types of magical items, and these do not form part of the maths of the game as they do in some other systems:
Hedge Magic - effectively a form of herbalism, items created can range from powders through oils, infusions, vapours etc. Their effects are typically quite weak, including antitoxin, purgative and soporific, and these items are the cheapest and most readily available in the setting. Importantly, they are not necessarily obviously magical.
Alchemical Devices - these are magical one shots created by magicians. They are relatively expensive and any sentient being who touches them realises their magical power. These are relatively rare, and can typically only be found in the largest of towns.
With both of the above types, players are able to learn how to create them themselves.
Legendary Relics - these are extremely rare, permanent magical items, and are equivalent to the sword +1 types that you might get in D&D. You never find them for sale, and there are whole organisations devoted to rooting them out and securing them to prevent their use by the general populance. As with alchemical devices, touching one immediately reveals its power, but it takes a little extra effort to actually be able to use the power it has. The art of creating them has been lost of many years, so all that are left are those created by the masters of old.
"Traditional" fantasy elements
- Races - There are orcs, goblins, dragons, dwarves and elves, albeit
with some of these having a twist.
- Heroic game - The setting is
written with the expectation that PCs are going to be heroic
characters, and there are specific rewards to encourage this
- Classes - Although not a class based system, Hellfrost and
Savage Worlds allows you to create the same archtypes as other
fantasy settings (rogue, archer, fighter etc). However, the
flexibility of the system is what I love about it, and should you
choose to use it I would encourage you to try and think outside of
the narrow classes you are forced to use in other settings.
Casters are powerful but magic is risky
Broadly speaking, magic is dangerous, and the setting is seen as 'low-magic'. Most types of caster are subject to a form of back-lash known as 'siphoning' which at its worst, can see you lose your powers for days, gain wounds or suffer a permanent drop in your spell casting ability.
There are different types of 'magical' characters as follows, and their powers are a subset of the total available in the setting. Within each power you have to choose a 'trapping', e.g. sound, lightening, that affects what your spells look like when cast and possibly add a mechanical effect as well:
Hedge magicians - these are your herbalists, and there is little/no risk in what they do, offset by the fact that their powers are the weakest.
Druids - Limited to specific races, they gain bonuses/penalities to their rolls depending on their surroundings.
Elementalism - Focused on one of fire, water, earth, air with powers that mirror the chosen specialisation.
Hrimwisards - Draw power from the cold in their surroundings. These are seen as social pariahs in many parts of the realm due to the encroaching cold weather gripping the land.
Heahwisards - Noble wizards from a particular part of the realm. Their power focuses through their staves, and the longer they have to prepare their casting, the more powerful their spells can be.
Rune magicians - Limited to dwarves who learn runes, each of which is a collection of three different spells. Their ability to learn new spells is more restricted than the other types.
Priests/Paladins - The setting has a fully fleshed out pantheon of gods, and clerics have to choose their patron deity. This gives them access to specific powers, but they also have to adhere to the tenets of their god, including avoiding specific minor, major and mortal sins and observing feast days. This is largely done through roleplay, and the penalties for sinning can be extreme, including losing your powers permanently until some major restorative quest is undertaken.
Combat is important but not the sole focus.
Combat in Savage Worlds generally is dangerous, and this forces players to think very carefully before engaging in any fight, even with puny goblins. Encounters in Hellfrost are expected to be less 'balanced', which can work both ways. The party might stumble on a small group of emaciated goblins licking their wounds from a fight the previous day. Alternatively, they could happen apon a powerful Hellfrost Dragon they have little hope of beating, and have to run for their lives.
Combat itself is usually over quickly, and there is less prep work required for the GM when compared to many other systems. The combat also scales well, allowing truely epic fights with tens of NPCs on either side.
In addition, there are rules for social combat, dramatic tasks, chases, dramatic interludes, managing a resource such as a temple, trade caravan or mercenary group. It took me a little while to get used to it, but now I would estimate that only 1 in 3 or 4 of my 'encounters' are combat related.