The Valar did not diminish the Istari's power. They gave them rules.
Also, I would like to point out that Tolkien creates a distinction between an eala being
clothed and one being
incarnate. Ealar could evidently take shape and discard it without much consequence; that is, until they began to use that corporeal form for actions that were especially tied to being a physical...being. As has already been mentioned, eating, conceiving, etc. A lot of the shifting of shapes was done fairly early in the history of Middle-earth, and we can presume that it was possible because those ealar had not become so bound to their forms as to be unable to change them, or suffer consequences for abandoning them. That an eala can voluntarily abandon its
fully incarnate form is evidenced by Melian's return to Aman after Thingol's death.
Here's some more
crap by me. I've written a lot on the subject, actually, so a search for "obloquy" would likely yield every thread on the Downs with embodiment and such as its topic.