I'm working on the assumption that D&D alignment is an objective mechanic: in a world where alignments can grant magical power and create planes of existence, and a spell can tell the difference between a man who saves babies for Pelor and a man who eats babies for Pelor, alignment must be objective and intent counts for very little.
This is a social issue, not a mechanical one.
Mandating changes to a player's character is a Big Deal and can destroy the trust in a group if handled poorly. If he thinks his actions don't merit punishment, he will go on the defensive and there will be Bad Feelings in the group regardless of the mechanical outcome. Before you lay down a ruling like this that will so seriously impact his character, understanding must be reached. To this end:
First decide if it's worth it.
I've had at least one chaotic monk who I just let alone because of the group's social dynamics: the player was younger by several years at an age when that was significant; his actions were rarely negative for the party; and he actually made the group laugh.
Alignment, especially as a class requirement, isn't a balance issue. Although alignment is almost impossible to excise from the system, exactly which alignment a character has is largely irrelevant to mechanical balance. So if everyone's safe and happy, maybe just let it drop because the problem is entirely cerebral and not actually impacting the game as it's played. Assuming that's not the case...
Work with him to create a common baseline.
Many alignment debates spring from both parties feeling the definitions are obvious when in fact everyone has a different idea of what the alignments mean and look like.
Before you bring in the alignment hammer, sit down with him outside the regular session. A lawful character is probably acting in accordance with a code of some sort, so ask him to help you understand his actions by writing down his code. Come prepared to study the D&D alignment concepts together (not to lecture him on them). Work with him to make the code fit the D&D definition of lawful while still being as close as possible to his vision of the character.
This gives you both a clear idea of what is and is not lawful for that character; now your discussions can have a reference point you both agree on. You might even find that he has some vision or insight you didn't understand before.
Make it a story.
Now that you have common ground outside the game, give his PC a chance to make the change organically from within: whether he adjusts his behavior to match his code, or changes his alignment, if you make it a cool story instead of a decree from on high there'll be more buy-in from the player.
- He defies the outdated passiveness of his order and strikes off to be a vigilante hero; the Doctor in Doctor Who is a grand example of this concept.
- His respected mentor needs the party's help and while they work together the monk is reminded of the importance of an ordered life.
- He falls in love with a chaotic neutral druid and renounces his old life.
- He's been influenced by some subtle mind magic and must throw it off before it destroys him.
- An injustice that he feels personally about cannot be addressed through lawful channels; he still follows a personal code but disregards the societal structures that have failed him.
You get the idea: help him do something cool whatever the mechanical result is.
You're not the boss
Again, this is a social issue. The Game Master is rarely the leader of the social group and he's certainly not the High Judge of Fun. Remember this whatever you do, and remember that everybody needs to be safe and happy first. Only then can we worry about following the rules.
Here are a few things to consider :
Tactics
If a full attack is "all" it takes to down someone, force Move actions. Could come from cover/concealment or combat maneuvers like Trip/Knockdown or Disarm. If you just play "rocket tag", you're implicitly accepting that if you miss, there's a good chance you're dead.
Note that this is exactly what happens IRL between powerful forces in a battle and in this respect, is not a "bug" of the system but a simple truth.
Intelligence
So you're targeted by a Master Ninja, who manages to sneak up on you and place a Death attack. Curse you, Hayabusa ! Wait, you made your save ! Time to grab your trusty bow and fill him with arrows...
Well, boo. The ninja has broken/stolen your bow as well. Not only does he make his escape, he's slowed you down by forcing you to have it repaired / replaced while you try to get it back.
This goes a step further in Tactics, and is to be expected of Ninja, for example. Study your target. Know their strengths and weaknesses as well as yours. "That Brilliant Bow of Badassitude could be a problem if I must escape. Can I get rid of it ? What about impairing the bowman ? Maybe I could blind him ?"
As an aside, the GM should make sure the players don't feel cheated though. Extreme competence is assumed as part of the characters (especially past level 10) and robbing them of that can be frustrating to no end for some.
Numbers
So they can take the Big-Ass-Monster down in a round ? What about 10 Medium-Sized-Nuisances ? One by itself could barely hope to hit them, but with flanking, teamwork feats and simply being all over the place, the little pests could prove to be annoying. Add in a Leader-type and you could even be worrying your characters.
Story happens
Take the characters down a notch or two through Story. Have them stripped of Rank and Privileges by the King or even make them straight Outlaws. Have them stranded on an island (and some of their equipment lost to the sea) after their boat got caught in a storm. Have their home base attacked (and their Mentor killed, leaving them unable to progress in their main class) while they were on mission.
Change focus for a while
Once all is said and done, if the combat has become so easy it's boring, it may be time to try a little courtly intrigue for a change. Or why not a mystery ? Possibly meshing with "Story happens" above, there are plenty of opportunities to take the players / characters out of their comfort zone while staying true to the setting. They'll be happy to resume bashing heads once they've stumbled for hours finding a tangible threat to pounce on. Or hey, maybe they'll actually enjoy trading piques with the Jester and decide they want a piece of land and a throne of their own ?
Best Answer
Finding out why the elven magic has stopped working could be a very interesting adventure! The direction of the adventure largely depends on how magic "works" in your setting. This is only really limited by your imagination and what you and your players will enjoy. Here are just a few ideas to get your creative juices flowing.
1. Magic comes from the gods, it is blocked because they are unhappy. The god that grants the elves their magic is unhappy about their behavior or philosophy. This can be resolved by finding a way to appease the god, finding a new god or source of magical power, teaching the elves how to maintain agriculture without magic or even traveling to the realm of the god to give him a stern talking to (or even a spanking if you don't mind your players fighting gods).
2. Magic is being absorbed or blocked by something. This something could be a cult who wishes to starve the elves to make them weak, a large monster that is in hibernation and gathering all magic within a certain area to get strong so it can awaken or even a magical artifact from an ancient civilization gathering energy to explode or summon demons or transmute all bread into bunnies.
3. Magic comes from the planes. If you would be interested in some adventures traveling between dimensions this could be a good way to introduce it. The players have to track down a disturbance on another world or in between worlds where the connection has been disturbed. Maybe the amount of magical energy in the universe is depleting due to entropy and your players must find a way to replenish it.