Thanks for the name drop, WebShaman.
'> Yes, balancing for truly epic/legendary levels is a nightmare, requiring extensive calculations, spreadsheets, and immense amounts of playtest. And we're dropping paragon levels (61-80) this month, too, along with 32 new paragon spells.
'> That'll be the last iteration, and the foes will be the campaign closers, the Elder Evils (development of which is likely to take a couple more years).
Interestingly, paragon levels are like epic levels in a number of respects, from a balancing perspective. In terms of game balance, the real purpose of epic levels was to draw classes closer together in their statistics. WIth only 20 die pips of granularity, abs, acs, saves, and so on begin to divirge too widely to be sustainable under the pre-epic progressions. We had a similar issue with legendary vs paragon levels - if we continued legendary ab progressions, ability point handouts, skills, and so on, dexers would wind up with untenable acs, mages with absurd skill point totals (eliminating any 'choice' of skill), and melee builds would have untenable abs versus support builds - to name just a few issues. We also decided to have paragon levels not add casterlevels, as it would've blown the spell resistance numbers of some of the multiverse's nastiest beasties all to kingdom come.
So, from a game design perspective, the purpose of epic levels isn't at all mysterious. It was to keep the various and sundry classes close enough together in the core statistics so as to prevent game breakage.
Of course, if we read the original post's question more broadly, as in 'why have them at all', instead of 'why do them as they were done', the answer is basically - to expand gameplay. Game design theory tells us that players like regular indicators of progress in the game, and that's one of the purposes that levels serve. They are a progress marker, and an indication/reward for time invested playing. If you want players to spend more time playing, you need more progress markers. The real trick, of course, is implementing additional levels without completely negating all the content of the previous levels (see, e.g., WoW) - one reason we've been working on paragon levels for over two years, now.
If you're at all curious about how paragon levels panned out, or the feats that are being implemented with them (you can't hand out 6 new feats without giving players something to spend them on), or the paragon spells, you can peep this spreadsheet:
Paragon LevelsFunky