DOUBLE EDIT: You also seem to be making the assumption that magic/traditional and modern/technology are glued together and mutually exclusive from each other. That "tradition" can only involve "magic" and "modern" can only involve "technology," and the two cannot mix in any way. While this is very common in fiction, I don't think it's right to assume it's the same for this world. That "tradition" can only involve magic and no form of technology (which is ridiculous because the bow and the blade were new technologies once) and society has to forsake magic in order to gain new technologies or social advancement (which I can't understand because magic and fantastical races can inspire social and/or technological change).
Magic-induced stasis aside, I see no reason why both the fantastical and the technological can't continue to grow in the world of P:E. Dare I say it: feed each other? If magic and technology don't get along (which I'll assume they might not since the developers have hinted that people seem to be creating technology as a way to fight magic) it's more than possible the traditional will rise to the new technological challenge rather than shrink away. For example, based on what the developers seem to have hinted: magic is more powerful than the blade, so muggles invent bullets, so wizards start wearing more armor, so (maybe) muggles invent better bullets, so (maybe) wizards create more efficient magic. It goes back to my theory that "magic" isn't passively fading in the presence of the "modern." That "tradition" and "technology" aren't mutually exclusive (as the traditional mages are taking advantage of new technologies to fight new technologies). And that the two might be improving each other rather than one simply sitting back and letting the other swallow it whole.
I feel like your theory only works if we assume that "tradition"/"magic" and "technology"/"modern" are mutually exclusive and one passively lets the other crush it, rather than mixing and challenging each other. And again, it took centuries for us to get where we are now without magic, fantastic creatures or gods getting involved with our daily lives. How on earth can it happen in this world with these?
My reasoning is that, technology can catch up with magic, and completely exceed it, making magic obsolete.
If you look at a modern army, let's say the american one, It's difficult to imagine an army of mage and magic-sword fighting warriors waring against it. Or they can, but then we have fallen in some heavy ultra high fantasy stuff.
The problem is that if magic and technology mix, there's not much point in magic anymore, since it's just another physical force, and Magitech heavy universe are basically disguised science fiction. They don't give the same feeling.
By traditional fantasy, I mean a fantasy with only ancient civilization and no modern technology. It's not really about magic or not. Magic could be minimal or even inexistent (lowest fantasies).
And I believe that makes a huge difference on how the whole world feels. An ancient society that can compete with a modern society is basically a modern society herself (even if it still uses some magic). Modernity can arise, and supplant everything (in 500, 10 000, 100 000... years).
Unless Technology is seriously inhibited by something else.
Example 1 : even the smallest magic presence perturbs the surrounding space, making it impossible for any ''refined'' and precise technology to work (even if it's solely mechanical) . Which means only big bulky guns, trebuchet... could work around a magical item/mage/warrior/whatever.
Example 2 : The very nature of the gods makes them despise modernity. And they, and maybe other magical/folkloric elements, will work against it.
In that case, technology would just never further evolve than primitive applications. And the world will max out at a renaissance level.