The workload is obviously intense, but I think it's an exaggeration to say it has a reputation for "completely burning out students". It's true that people get worked hard, but I haven't actually seen very many burn-outs. Most people will get by just fine (if it's any comfort to you, a vast majority of PPEists will graduate with a 2i, with a good proportion attaining Firsts).
I also think you're being harsh in saying that Oxford churns out graduates who only know how to write 5000 word essays in short amounts of times (which in and of itself can be a useful skill depending on your career) and know nothing else. Careers Services offers plenty of opportunities for students to brush up the commercial side (eg for solicitors, they invite recruiters to do mock interviews and look at your CV), Oxford regularly invites practitioners to give talks, and there are plenty of student societies that you can get involved in to hone your non-academic side (eg the student consultancy, Oxford Management Society). Plenty of ways to hone "real world skills", even if academics don't necessarily provide for them directly.
London definitely has its charms, but personally I really like Oxford. I come from a big city, and it's nice to live somewhere quieter for a change. There's enough going on that one can be happily occupied (are there any specific activities you would like to participate in?), and if you want to go to London, it's just an hour away by train. This is a personal preference though, and I know some people who absolutely love living in London.
PPE offers quite a lot of flexibility in terms of customization; see
http://www.ppe.ox.ac.uk/index.php/course-structure. Looking at
http://www.economics.ox.ac.uk/Undergraduate/undergraduate-matrix, I imagine courses like Mathematical Methods, Econometrics, and Game Theory would be pretty maths-heavy. Or at least that's the impression I get based on the exam papers.
I'm all for people choosing whichever place best suits their interests. However, I also think that it's important to provide as much information as possible so people can make the most informed choice for themselves.