I'm a fan of the psionics system myself, but I do agree that the fluff doesn't fit well if you run with the default. Mind you, it's fairly easy to make it your own, and The ban-list of powers is a good start. I doubt that there's anything I can suggest that will be of much help with the refluffing.
I think I'll start with a Ban-List and move on to some ideas for how players can refluff various powers.

Alternately, you could have it so that psionics (or whatever your world calls it) is more powerful that the widely used magic. However, the only way to gain the fluff-breaking powers, you must burn a feat (and you can't get the 9th level banned powers until you are at least epic levels provided it gets that far.) You don't have to use this, but it's food for thought.
This, aside from the first sentence, if pretty interesting. Would you suggest having access to each new level of powers require a feat, or what?

On that note, I've been working on implementing a new 'magic' system to my game world called allomancy, if you are interested in including that instead of or in addition to anything already existing.
I might be. I'll look at the link in your sig.