To expand on the first half of the question, about learning spells you don't know(which was covered perfectly by others, but apparently needs to be restated):
basically, if a spell is in the players handbook, and familiar to the magic world at large (documented, studied, or just well-known in lore, or in other words, in the players handbook) but unavailable to a character in a physical spell form, double the cost of making the spell as if it were a scroll. Figures from others posts will show why this is prohibitive, without being completely impossible and without taking too long to accomplish for small boost in versatility.
basically, just do What Dale M said. He said it well, which is why I ignored that half of the question to begin with. It works. I just double the cost/time myself, is all.
On a related note, creating a spell from scratch that is the players own creation can also be undertaken by multiplying the cost/time factors by ten. Or five, if you prefer something more plausible to actual time available to a character, though I believe new magics require more inventiveness and require more experimentation than that, and like to reflect the greater effort it takes to create something from scratch that could potentially impact an entire world.
The rest of this post remains, and answers the second half of the question, about how to balance having so many spells:
this might just be my two cents on the matter, but does it matter how many spells he has in his spellbook?
More spells just means more chances for memorizing the WRONG one. Believe me, I managed to survive a 2nd edition campaign as a human wizard with max intelligence; 18+ intelligence meant you COULD have as many as many spells per level as you could get your hands on, but having every spell in the book IN THEORY (ie, in your spellbook, but not memorized) doesn't help you one jot when you can only sit down and memorize one set of spells in any given day. Believe me, I made a point of owning as many spells as I could, simply because I had FINALLY rolled a mage with a natural 18 intelligence.
Also remember to note that, as per the "Your Spellbook" sidebar on page 114 of the PHB, losing a spell IS entirely possible for a wizard.
The sidebar details the steps you can take to copy down memorized spells back into another spellbook if you don't have a copy of it available for whatever reason, and further stats that you must find new copies of spells (ie, that aren't memorized) to fill out the remainder of the new spellbook.
So if you lose a spellbook, you lose all the spells you don't have memorized.
Rather than worry about the advantage having a well prepared wizard gives your party, I suggest you embrace it, and let your wizard shine as he, at least in my opinion, is supposed to shine. Let him be able to customize his usefulness to the party by have near perfect spell choices, because he will not always be able to memorize the right ones, and will have to find ever more creative ways of using the wrong ones.
Ask yourself instead what you might do about the eventually overwhelming onus he will incur with having to track which book has which spells, where he keeps them, how many copies of each spell he has, and how much care it takes to preserve such books - after all, a book of magic is just as likely to be burnt, soaked, cut, blown up or used as toilet paper by the resident barbarian as any other book that a character is willing to bring with them. My point is, Spellbooks aren't any more durable than a normal book.
Enforce that, and let him gain a library worth protecting.
Eventually, he will have to start leaving spellbooks behind, taking only the most useful spells with him, in a form that he can easily carry without overburdening himself. if he does not, he risks his entire repertoire of spells every time he steps outside his sanctum.
I suggest using the old rule that stipulates each level of a spell is equivalent to one page in a spellbook (that is what I enforce in my own games), though I still rule that a spellbook worth protecting has a maximum of 50 pages, as they tend to be built to resist the elements more than the 100-page spellbook with thinner covers and less bindings to seal them shut.
I also double the cost of such a spellbook, meaning you have a smaller, better protected list of common adventuring spells to take with you when you need them. I just don't stop a player from buying the larger less protected one if they want (and indeed, let them still start with a 'regular' spellbook, as this is in most cases the spellbook afforded to them during their apprenticeship.
Now, the reason a spell equals a page per spell level is simple; at lower levels it will not be a problem, and even following the standard spell gain progression of 2 spells per level, you simply aren't able to fill the standard spell book before you reach level 13 (upon hitting level 13 you find yourself 2 pages short of the 30 spells you would have available to you, assuming you gain the highest spells available to you upon each level gain; 6 at first level, followed by 2 spells each level thereafter)
this can happen sooner if the player takes pains to learn magic from other sources of course. but even then, it is expensive, and I have not seen anyone fill a book beyond bursting before level nine using this method.
I find it a good balance to help curtail a spell-hungry wizard. maintaining and reproducing back up copies of spells is time-consuming and expensive, but not doing is just asking the DM to start destroying items. remember, every time a character fails a save to burn in a fireball or swim in acid, his gear is also at risk of burning. personally, I assume if a player made the save, so did his gear, but failing it means its all at risk. same thing goes for swords, clothing and bag straps. just remember to apply damage to gear when those saves are failed, and you're on the right track.
Just remember, a leather-bound spellbook, in a leather backpack, on the back of a player facing towards the center of impact for a fireball has a much higher chance of surviving than one open on the table in front of him.
to simulate that, I basically count each layer of protection as cover - either full or partial.
The fireball hits, expelling flames outward from the impact point and the character fails his save. next in line is his backpack. it takes damage, in this case fire damage, lets say 32 points worth.
As a sturdy adventurers backpack i would say it takes 24 instantaneous fire damage (that's a burst of flame and heat, which items fare better against than flesh and blood, effectively giving it resistance to fire for the purposes of this application of it) to hurt it badly enough to tear open or otherwise expose the contents to the fire itself, leaving 8 hp of fire damage to splash over the contents as well.
His spellbook, a sturdy well made leather bound construction, with gilded edged would be at least as durable as the backpack to instantaneous fire, so 8 hp of damage to it is enough to blacken and sear the edges of it,(10hp cover, with resistance for half damage in this instance) but not enough to set it alight (though it might smoulder if left too long) meaning the pages within have been saved.
A regular book, counting as easily combustible, would have had a harder time of it, as it uses paper, instead of parchment, and suffers a disadvantage to fire damage of any kind (instantaneous or not), though the cover still has to be burnt through before the pages themselves are threatened. with 8 remaining points, the cover burns through (I give it 4hp on the spot, a fair chance that a swordblow could sunder it completely,without guaranteeing it.) That still leaves 4 hp of damage to burn through the pages of the book, potentially ruining any spells on those pages, even if they are not consumed entirely.
You don't need to apply this all the time either. I pretty much only ever bring it up when something happens that seems like it WOULD be a risk to the items in question, and the results matter and would be interesting to play out. Just make sure you DO use it, or something similar, every now and again, so that players don't get completely complacent...
Oh, and don't forget to have an enterprising young spell thief, possibly a dashing young grey elf rogue/sorcerer by the name of Tellisius Moonshadow, notice the bulging packs of the book-laden wizard on the parties way through town... He is always game for an easy mark, and other wizards will pay top dollar for someone else's spellbook. :)
I didn't cover Ritual spells, but then, once learnt, you don't actually need to have a copy of the spell to be able to cast it, and as such I don't think you actually need to - though I would rule it personally the same as any other spell. Without a physical copy, it doubles time/cost (my personal rule for 'learning' a spell you don't have a copy of) but you can always make a scroll, then copy the spell to another book from there.