Some of this is more clarifying questions than suggestions, but suggestions may stem from said questions.
1) Hospitaler. This class is very much designed as a paladin prestige class (though it can work for cleric as well, in PnP it is much easier to qualify for as a paladin). In PnP, any/all paladins are able to freely multiclass into this class. However, our class description and paladin multiclassing rules do not clarify this one way or the other. Are paladins able to freely multiclass into Hospitaler as per the PnP class rules, or are no paladins able to multiclass into this paladin prestige class without losing their paladin abilities?
2) I find the way in which it is written a little confusing, but the implication seems to be that if a paladin multiclasses outside of their orders multiclass list, that not only will the paladin not be able to take any more paladin levels (this is in line with D&D / Faerun rules), that the paladin will lose all of their paladin abilities (this is not in line with D&D / Faerun rules; they are supposed to keep the class abilities). Is there a particular reason this extra restriction was added to an already rather weak class? If it is to restrict certain power builds, it would make more sense to restrict those builds--especially since Blackguard can also be used for those builds, often better, and for a broader range of alignments.
Paladin is by no means a weak class but I also find the multi-classing rules for Paladin and Monk to be contrary to the source material they are pulled from. Also a little frustrating as it stops you creating some interesting combinations and characters.
That said I think the reasoning is to try and enforce the fluff of the setting rather than a desire to restrict certain builds. As it ensures your character is directly tied to the setting via its faction affiliation.
Safe bets usually are: Fighter/ CoT/ Hospitaler/ Cleric/ Weapon Master
Things that may be suspect and cause you to lose all your shinies: Rogue, Bard, Wizard, Sorcerer, Druid, Barbarian, Ranger, and anything else after this. I think sorcerer/ wizard/ ranger not to be a big deal as the rest of them for a paladin to multiclass into(and not the other way around((Sorc -> Pal))).
And I thought Hospitalers was designed more for martial focused clerics with a stricter dogma(which is roughly the foundation for a paladin). Meat heads who help the squishies of similiar faith get from point A to point B safely.
To be honest DnD has about a billion different classes for the same very simple concept - Holy Warrior.
You can argue they differ in a few ways but really you could fluff a Cleric however you like and it would fit any Holy Warrior concept and probably do the job better than the PRC or the base class. Hospilater is compatible with Paladin the same way it is compatible with Cleric.
In terms of the multi-classing though psappho is correct in that you will have class features disabled if you deviate from one of the established orders the same goes for Monk (no such restriction exists for Cleric). Which is a shame as a lot of the multi-classing options above are impractical due to alignment issues - Druid, Barbarian, Bard. Or allowed by the multi-classing rules Rogue, Sorceror and Ranger as they stand and thus viable.
I can only assume the concern is for the setting and ensuring these types of characters fit within established organisations. As the current multi-class options don't do a lot to quell the issue with power.
We probably need to look over the whole bit with Paladin (and Monk) orders, due to the contorted multi-classing rules that aren't exactly obvious to new players, nor are aligned properly to our class assortment vis a vis textbook D&D.
From the Vandria thread.

As Bella noted, I'll see about talking to Vincent. The multiclassing rules date from way way back at the start and really haven't been adjusted since, though they probably should be at least reviewed. Feel free to toss out suggestions here.
We're fairly close to accurate as far as the adhering to the FRCS rules on Paladin and Monk multiclassing, as far as I recall.
However, we may not have taken into account any alterations in secondary source etc.
That said, I'm not against changing it to something more uniform and less restricting. House rules clause exists for that very reason. That and honestly, I don't like having to police builds. It isn't fun for me or you. We'll come up with a workable solution that I hope everyone will be happy with.
I think the best solution is simply requiring that anyone with levels in paladin or monk must have the highest level in paladin or monk at any given time. Most of the worst abuses of the class are cherry-picking the front-loaded abilities, after all. A Sorcerer 19/Paladin 1 is a whole different kettle of fish than a Sorcerer 9/Paladin 10.
Paladins are a solid enough class that they can probably live without a change to the rules, but I don't see it breaking anything wide open to give them a little more flexibility. The only issue I see here is, is that Rogue will almost certainly be the main multiclass of choice for most paladins, which can be a bit of a flavor issue.
Monks, on the other hand, are a different story. Any build that is primarily monk is highly unlikely to be some game-breaking monstrosity, due to the severe limitations of the class itself. Letting monks take a few levels of cleric or fighter to beef themselves up isn't going to be some big issue.
As well, any monk that is a Sun Soul follower of Lathandar, is already able to multiclass into most classes as long as Monk is the highest of those already taken. Thus, as you said, it's not too bad.
The server rules aren't close to the actual multi-classing rules for Monks presented in the source books. The rules state for Monks that if you multi-class out of Monk and are not a member of a specific Order you lose the ability to take any further Monk levels after multi-classing out. Not that you have all of your Monk abilities disabled and are forced to either re-level out of the class or play a terrible version of a rogue.
Yes, and the reason for that is it is too easy to say you are an ex-monk as an excuse for some severe munchkin builds in NWN.
At the moment, we're looking at likely going for a more universal: "Monk must be your highest class level" system. Same for Paladins. There would likely be some exceptions for certain PrCs. We'll get the exact details ironed out and post further shortly.
There's still a lot of powerful monk builds that can be put into place with that version of having the highest leveled class be monk or paladin. But, it would only break the bank if lots of half-dragons and other powerful ECLs used those builds with the extra 12-20 stats they get for free at level 1.
I did say there would be exceptions.
Just gonna throw this in here, since HotRod mentioned Paladins multiclassing into rogue as a flavour issue - maybe we should make the greyguard PRC and then there's no issues xD
The more powerful Monk combinations you can already put into practice with existing multi-class rules. The only exception is the Druid/Monk combo but for that to be truly effective you need to be a very high epic. There isn't very many strong, strong Monk builds in comparison to what Cleric, Wizard, Sorc, Druid and even Paladin and Bard can throw out.
Could you give me an example of one you're thinking of?
Potentially a more important question is - why do people think Monk multi-class combinations are too powerful to begin with? I can't think of a build that is outright better than other combinations of classes that are not scrutinised as much. While the Monk itself is a fairly weak class.
It's because with one level of monk you get evasion, tumble, and discpiline. Evasion is a great feat, but I do agree that on this server it isn't that useful. There aren't too many mages who throw out evocation spells that have reflex saving throws. It's mostly to not be blown up by your own party members. Monk could get the shadow dancer treatment and move their evasion to level 3-4, which would limit a lot of the powerbuild options. The wisdom to AC bonus isn't that great unless you also have decent uncanny dodge coupled with it.
Monk/ Ranger/ Cleric is the classic tried and true. It becomes more monsterous with the ECLs available who have access to more free stats and benefits at level 1 than a human at level 30.
Monk/ Cleric/ Paladin strength version is also very strong.
Monk/ Wiz/ Arcane Archer
Wizard/ Monk/ Shadow Dancer
Wizard/ Monk/ Palemaster
Depending on uncanny dodge, Monk/ Assassin/ Blackguard can be pretty decent.
I think the issue with ECL races though is they make everything more powerful. I would say look at the ranger class and then look at the Monk class. The ranger class gets pretty much everything useful the Monk gets and he gets to wear armour. The Wisdom to AC bonus the Monk gets is to be honest inferior to being able to wear armour.
The Monks two main class features are - UBAB and Wis - AC. The Wis to AC isn't a boon more you invest a lot of points in a stat that doesn't do much else for you.
The ranger pretty much does the job of the Monk better in the builds listed above.
The wisdom to AC is still a significant boon on this server thanks to the plentiful scrolls, potions, and the fact that owls wisdom stacks with mass owls wisdom. That's a free 4 AC there, even if you start with 10 wisdom and cap dex.
It isn't though when you lose the ability to use a shield for the cost of a few GP you're adding +3 with no stat investment. Dual wield builds it is still debatable if its worth is as you're expending resources when you're already a little bit 'MAD'. Monk adds marginal AC at the lower levels which can compensate for the fact that dex builds suffer in the AC department in the early levels but it by no means pushes you ahead in terms of AC.
It does push you ahead in terms of AC in later levels when dex begins to outscale plate armor.
That only happens very late game now due to Adamantium Plate we're talking highish epic. That level of investment in dex and wisdom has meant your strength score is much lower than a plate fighter for very minimal advantage. But that is more an argument of why dexterity is a weaker build option which is true. Does Monk's Wis - AC negate that a little bit? Yes. Does it mitigate it enough to make up for not being able to do as much damage as a strength build I would suspect not.
Is it completely useless? Absolutely not but it is hardly a game breaking ability that the Monk possesses to warrant the level of restrictions that are placed upon it.
UBAB is the next big thing Monks have going for them but again that is a heavily restricted ability being pretty much limited to using Kama's.
May I ask why paladins are being called a weak class in this thread, I looked it over and folks are comparing builds and ideas like paladins are on the low end of the power game. And while everyone is allowed an opinion, Paladins per power/level are one of the most broken classes in NWN.
Paladin is quite strong.
I would rate the power levels as -
Cleric, Wizard, Sorcerer, Druid as the top tier.
Paladins and Bards as the second tier
Ranger and Rogue as the third
Everything else as the fourth.
Wizard, Cleric, HiPS, Charisma Paladin 15/ CoT 15, Dev Crit top tier
Everything else tier 2.
People with messy inventories tier 3.