Is there such a thing as too much choice in a game? I'm inclined to say no, as long as different choices bring variation.
My recent weapon-count on TitanNet brought this on - 39 weapons, 10 of which are pistols. This may not sound high compared to most MMORPGs having a gazillion different types of each weapon, but considering the stats of each pistol range from on average 5 at the most to about 2, there really isn't that much difference between two similar pistols.
The stats of the best pistol, for example, the Cobra Revolver, are 8 power (particularly powerful due to large cartridge), 5 accuracy (accurate, but not as accurate as any of the longer ARs).
An average pistol (such as the P229) has 4 power, 3 accuracy, making it reasonably powerful but only a bit more accurate than a machine-pistol.
When you consider that there are 5 stages between those 2 pistols, you can see what I mean when I say that there might be a bit too many pistols. The P229 shares the exact stats with at least one other pistol (although they are different in other ways, one of the pistols is single-shot for example) which seems stupid.
However, I really like having the player be able to choose equipment that they like. I want to have a whole ton of different clothing, armour etc. and even if there isn't any difference in them gameplay wise I think the cosmetic difference is very important.
Another important thing is the Titans, the player-run crime gangs. I want to eventually have the different Titans using different weapons, which may make an opposing Titan's pistol a valuable trophy, even if it isn't that good.
Anyway, I'm going to continue to add millions of weapons with virtually purely cosmetic differences whenever I get the chance (hopefully a couple with each update, I have 4 or 5 new guns as well as 2 re-skins waiting in the wings right now) and just try and stop me.
The thing is, it makes no sense to me to have identical looking equipment with different stats. What I'm trying to do is have enough equipment that gives enough variety for a player to get something they both like the look of (none of the pistols are designed to look 'bad' as such) and that has the stats that they want. I'm trying to give players as much choice as possible throughout the game but replicating equipment seems a bad way to do this.
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In general, however, substantial choice is most definitely not an inherently good thing. Focus on making what you have good and balanced. An underpowered choice is worse than no choice: nobody who knows what they're doing will choose it, the people who choose it without knowing what they're doing will be pissed, and you've wasted a bunch of development time to do nothing but piss off a portion of your players.