Strictly speaking, Iron Warriors did have downsides. They were basically barred from taking any of the Daemon (not Daemonkin or Daemon Engine) units. And back then, that was pretty huge. Bloodletters had AP2 and Power Armor. Daemonettes had classic Rending. Plaguebearers were poisoned and really really tough. Even Horrors had mouth-mounted Burst Cannons. And then there were the Greater Daemons... The problem was that they traded these disadvantages for Obliterator spam (they used to be 0-1) in a codex where Oblits were Elite but really should have been Heavy. Oh, the problems that alone would've solved.
People keep going over the broken things of the 3.5 CSM book and always miss the big two: infiltrating Speedlords and Siren. Granted infiltrated Speedlords probably needed an errata to nerf them (making Infiltrate be Infantry-only) and were a fairly obscure trick, but how does everybody forget Siren? And still nobody wept for the loss of Siren. In fact, many cheered. Some of those cheering were even CSM players.
This is all beside the point though. Look at the power armies. Eldar Wave Serpent spam. It's unusually strong, but it's actually fluffy. Eldar are supposed to ride Wave Serpents to war... even if they're not supposed to be outshooting main line battle tanks, but whatever. How about Tau Farsight bombs, suit spam and whatnot? Unusually strong, unusually versatile, and not without some iffy mechanical wonks (Boosting the to-hit roll of Snap Fire? Buffmander ignores how many rules?), but fluffy. Tau are all about using both their technology and their bonds of kinship to compensate for the racial Tau's vulnerability to melee, and they do just that on the tabletop. Tzeentch summon spam? Brutal and nasty, but fluffy. Tzeentch is supposed to be the unstoppable caster army, with only Grey Knights able to match them. Decurion Wraiths. Utterly impossible to kill. But again, fluffy. Wouldn't it make sense that the Necron maintenance automatons would be capable of repairing each other? Now try to play a fluffy Chaos or Tyranid list against one of these other fluffy lists and watch what happens.
Compare Chaos Marines to another weaker codex, Orks. The Green Tide is a very beatable list if you know what you're doing, but at least it works the way it's supposed to (and suffers against the things it should really be vulnerable to, like Blasts and Flamers). Barrel forward and smash things. Doesn't have to be sophisticated. Just has to be sufficiently blunt, and by and large it is. And yet for such a lousy codex in the scheme of overall power, Orks are actually looked upon rather favorably. Their fluffy list does a decent enough job at acting the way they should based on the fluff, yet without being overshadowed by some blatantly more powerful but hilariously unfluffy unit or option (see Nob Bikers). By comparison, I'd have the Brainleech Devourer purged from the Tyranid codex for even half of the fifty-odd worthless units in the codex to actually be viable again.