Other than writing/erasing more than you are comfortable with, I don't see a purely paper-based solution.
Similar to Matt's answer, I tend to put either clear contact paper or (lately) just drop the whole character sheet into a clear document holder. Any sort of notation I need to make gets jotted down on the plastic cover.
I'll just mark the progression during the night's adventuring on the sheet cover, but actually mark my hitpoints as X/Y (10/15) so I know where my current status is and also how many points I need for full health.
I take the spell list, and if I can cast it, I'll leave it normal, but if I cannot cast a given spell, I will mark out (again on the plastic) that spell with the wet-erase pen. It's great in that you cross out the spells that aren't prepared while preparing, then cross spells off the list once you have cast them.
As for other goodies, I would take a small note-card and write the item and it's usability on the card. If it's "used" and recharging, it goes into a second plastic pouch, whereas if it's is recharged and able to cast, it goes into the pouch with the char sheet. As for tracking when it recharges; you guessed it... write "Wand of awesomeness, recharges in 3 days, as of [game-date]" on the recharging plastic pouch.
Also, I have found that glass beads you can get at craft stores work WONDERFULLY for counting things like arrows or whatnot. Since they are very frequently changing in number, I end up having 10 beads that I use for my current quiver (or blood pool in Vampire), and as I shoot the arrows, I toss them in the "used" pouch. When I run out, I
subtract 10 arrows from my character sheet and pull out all 10 beads.
I know that Herolab has a utility on the full-version that lets you track everything, even initiative turn order... but that program gets a little too pricey for me. I've knocked around with the idea of building an application for quite a while "when I get around to it", but that time hasn't happened yet.
I just thought of another solution I've seen endorsed by a few folks around here; keep track of everything on your character sheet and plan to fill out a new sheet every time your wizard goes up a level (since most of the sheet will be pretty messy from erasing/rewriting by the end of the level). I don't like the planned obsolescence of that approach, but I must admit it IS doable.