We just played it as "spells cast from items don't require any prep rounds" and otherwise the activity requirements are the same as casting a spell normally.
That's perfectly reasonable, and in line with the balance of the RM2 action economy.
I think the problem only crept in when 'doesn't require any prep rounds' was changed to mean 'doesn't require any prep rounds
or any significant activity to cast'. That was the mistake, and the root of the problem.
I also don't understand the rationale for making instant spells take extra long.
This again I think is the result of the misunderstanding. Instant spells aren't taking extra long, from the perspective of RM2, if they take 75% activity. All instant spells required exactly that much activity in RM2. There was no spell that took less than 50%.
It's largely the items that are meant to help Arms and Semi characters that are weakened. Given how things go at the higher levels where magic items are common, that seems the reverse of what you would want. Arms characters are the ones who need the biggest boost (and Semi characters already have their own instant spells, so they don't lose much here.)
Yes, but recall that this was not the case in RM2. Casters were incredibly weak at low levels in RM2. A lot of this language has just been cut and pasted from RM2 without adjustments being made for how much Instants changed between RM2 and RMSS.
What RM2 lacked was a truly instant class of spells. RM2 used the word 'Instant' but only to mean 'requires no prep', not 'requires no activity to cast'. I'm glad we have a new class of truly instant spells in RMU, and Landing is the perfect example of an old spell that is now much more intuitive and better functioning in RMU than it was in RM2.
But that also means that some spells that were not meant to be freebies (i.e. no activity cost) now are. Bladeturn is the perfect example. RM2 never intended archers to be able to get a full, 100% OB attack and +100 to their DB in the same turn. That's why I am saying that some spells that were transformed from costing 75% activity to now costing 0% activity need to be reevaluated for balance in the new action economy.