Well, this is all speculation on my part, since I've never actually used them myself. However I am in a game with Shangri-La right now, and while I haven't bumped into them, a cursory look at the graphs shows they aren't doing very well. They really strike me as being in the same situation as MA Tien Chi in that their diversity can hurt them as much as it helps.
You'll obviously want to be recruiting a Hidden Master in your cap as often as possible, so thats 400 gold per turn down the drain. You're also going to want to get up some extra forts early to recruit some of your non cap mages (the lama's, mainly), who are also around 250 gold each. Plus you'll want to recruit infantry, cavalry, archers, whatever you're using for expansion, which are either gold hungry, resource hungry or both. Gold is going to be beyond tight in the early game, even with heavy order and production.
Their magical diversity, while great on paper, could easily just end up as a distraction. They only have really good earth, air and astral access. Death, and blood come on mages who suck at research and have no guarantee of more than one in each path, limiting their usefulness, especially since they compete with the much better overall lamas. Their only nature and water access are through the Wise Ones, underwhelming cap only mages who compete with the much better Hidden Masters for a cap recruitment slot and aren't guaranteed more than one in each path.
Overall they just strike me as a nation like MA Tien Chi. Sure, they
can do a lot of cool stuff. But not all at once. An extremely skilled player could no doubt wreck with them, but they could just as easily flounder and die early. Anyone playing them would need to have very narrow goals for expansion, pretender design and midgame and endgame. Overall I'd vote to allow them, you seem to be on the opposite side. Of course it's Mighty Peon's game, so I guess it's up to him.
