The tier system was introduced in dnd-4e, and is a more formal development of ideas from earlier editions.
Heroic tier: Levels 1-10.
Characters may have impressive skills, but operate on a basically human level.
Adventures take place in local environments - dungeons, towns, forests.
Threats are mostly part of the local ecology, or summoned or created. (Natural creatures, other sapient species, created mechanisms, plants.)
Paragon tier: Levels 11-20
Characters now have extreme, near-superhuman levels of their lead skills. They can accomplish things no ordinary human could (and make very difficult skill DC rolls!)
Adventures take place in a wider arena. They may save entire kingdoms, not just local villages. Their growing reputations will make them major players, even if birth and rank don't. They might lead guilds, be involved in court politics, or command soldiers.
Enemies also exist on a larger scale. Extraplanar threats become more common, and less likely to have to be summoned first. Players may meet dragons, invading warlords (and their armies), elemental or demonic creatures, colossal magical beasts.
Characters gain powers from a 'paragon class' - a development of the 'prestige class' idea from D&D 3e. The paragon class gives tightly-focused powers related to a specific concept of how to play the character's main class. (For example: A druid who specialises in driving animals berserk. A warlock who steals life from opponents. A barbarian who becomes more and more like a bear.)
Epic tier: Levels 21-30
Characters can accomplish awesome and impossible things with skills alone, before they even bother to use their class powers. Which are increasingly powerful.
Adventures are routinely extra-planar - if the characters even make their homes on their original world any more - and threats are ancient dragons, powerful planar entities, titans, or the like. Entire worlds or areas of existence may be at stake.
Each character progresses towards an 'epic destiny' - chosen by the player at L21. They gradually gain extra powers appropriate to this destined ending. (For example: becoming a god, or a transcendent energy-entity, or a heroic legend, or an immortal traveller.)
This effectively gives the GM 10 levels notice to plan the character's heroic final fate at level 30, which is where D&D 4e ends.
(The system has developed from a concept present even in very early versions of D&D, that a high-level character would eventually become immortal.
The BECMI D&D is the first version with this idea, providing for immortality after level 36. Later editions had the concept of 'Epic levels', beginning at level 21. This progression tended to be slower than at levels 1-20, but to allow otherwise impossible feats, and continue to immortality. In D&D 3rd edition, Epic levels were 21-40, and Deities and Demigods provided limited rules support for becoming gods at levels 41-60.)
On a comment, you stated:
"The players have done research on the guards and determined that they’re not much outside their gear. Their patron WAS a wizards’ guild who specialized in creating magical equipment, but the wizards have all recently died in mysterious circumstances related to the plot, so the patrons buffing the guards is not really an option"
Yet, we need a way to make this work from a story point of view without creating an opportunity for a huge power boost for your players. So, why not change things up just a little bit?
The Iron Man suit doesn't make anyone stronger. It uses its own Strength Score.
Doesn't matter if Tony Stark, Hawkeye or Pepper Pots is inside the Iron Man suit. It still has Strength 30, because it is the armor that is doing the work, not the person inside. We can use something similar to this concept.
The research was mostly correct, but it failed on one point - their magical gear isn't actually standard magic gear at all. Instead, the gear is a construct of sorts that shapes itself in the form of armor and weapons, to be equipped and used by a creature. The creature gets unbelievable power, but pays a price that isn't yet apparent to the group - maybe a shortened lifespan, maybe a brainwashed servitude to a faction, maybe the inability to leave a certain area... pick your poison. The truth of the thing is - who is actually fighting isn't the guards, when they don their gear. It is those special constructs that their wear. The guards themselves work just as pilots and power sources.
Mechanically, the gear those guards are using isn't buffing them. It is replacing their stats. While using their gear, the guards have a paragon-like stat block, with all the abilities that entails. Take the gear away, and they revert to their heroic power level. It is the gear-construct that fights, not the person inside.
If a player decides to don the gear, what happens is that their character sheet gets replaced by the one the guards were using. They lose access to their own individual powers, their own scores, and instead are given access to the powers of this standardized, mass-produced gear-construct until they take it off. It might be useful, and might be a power boost for a little time, but once they start leveling, this gear will be eclipsed by their own abilities, making it obsolete.
Add some sentience to this magical gear-construct, and you can create even more opportunities for roleplay and plot twists.
Best Answer
First I'll direct you here. It's a great article on thieves and what's important to them.
Halfling Crossbow Thief
Here's my first take on a ranged rogue for your Halfling. I ignored the short sword and went with dual hand crossbows. You don't want to try to focus on melee and ranged at the same time, choose one and stick with it. Both are viable, I just chose ranged because that's what I'm familiar with.
This build focuses on stealth and damage. Thieves don't have a whole lot of nova potential, but this build does it as well as it can. Use a ranged basic, Backstab, Sudden Bolt, and Action Point another ranged basic using Slaying Action to double up on the sneak attack damage.
Feel free to comment on what you like and don't like and I'll edit to accommodate.
Optimal Crossbow Thief
Here's an optimal ranged build for Matt. The drow gets two big advantages - Ruthless Hunter (gives you d8 [W] damage and high crit) and Merciless Killer (+5 damage against bloodied targets). Everything else is pretty much the same.
Optimal Melee Thief
This build focuses on charging and knocking things prone to get double attacks. Also note the synergy between Unbalancing Trick and Sneak in the Attack if you don't have the combat advantage to use sneak attack yourself.