[snip]

As much as the idea of "gain skill by using it" makes sense in a lot of ways, it doesn't mesh well with the scaled-world system. The reason's really simple... the more you experiment with various skills, the more the world levels up. It's not just the more you kill/quest/work on your main skills, the world levels up around you if you decide to spend some time crushing up flowers in a bowl or picking locks. This means that, optimally, you will never use any skill that you don't plan to seriously level up. These skills will be useful if you level them higher, but they'll just be padding your level if you only add 20 or so skill to them and move on.

In "traditional" RPG leveling systems (and I'm not saying they're good, I'm just saying they match a level-scaled world better) you gain XP from most things you do that involve your skills, then use that XP to level up the skills you choose. It's not realistic, but it allows the player to:
1) Use any skill they want to at any point without fear of "harming" their character build,
2) Decide which skills matter when it's time to level up (and for the world to level up).
So you get to play with low level smithing, enchanting, spell-casting, whatever without it resulting in a sub-optimal build. If you decide you like one of these skills, you can start pouring points in there during a level up.

On the other hand, if the world were static-leveled (by which I mean each area has its own level, so you might find a level 40 dungeon if you wander too far into the deep forest) then the "use it to level" it system suddenly becomes perfectly balanced. Since your level no longer determines the difficulty of the enemies encountered, you can level your character however you like without worrying about "gimping" your build. Then you can decide which difficulty of encounters you want, using your level as more of a general guide than a world-scaling variable. The other thing a static world adds is the ability to try to fight above your level, which is the whole point of trying to make an optimized build in the first place; to take on higher level challenges. With the leveled world, there simply are no higher level challenges.

I really think that one of these two things needs to go. Personally I still like "use it to level it" so I'd much rather see a completely static-leveled world (maybe the main quest could be exempt; let it level with the player if you need to, but I want to encounter dungeons of pre-determined set difficulty).

[snip]

Urk, I really don't see the problem here. This is my own personal opinion though, but still:

This is a RPG, read it Role-Playing Game. Many of you have the game stuck in your heads without the Role-Playing bit in there, and it doesn't work that way. If you are playing a diplomat, who can talk their way out of every situation, of course you are going to be weak in combat. Subsequently, if you play a character who has combat-oriented skills, of course you are going to be godly in combat.

As for the loot, I am currently level 42; the loot i find is usually level appropriate, i sometimes find some unique and very cool weapons/armors (even with my 100 blacksmith and enchanting made gear) that are usually great for the level i find them at. The enemies? I sometimes see a half decent piece on equipment on an enemy but more than not they wear stuff that at level 42 is just junk to me. This is spot on as far as i am concerned.

Not only would I make dungeon levels static, I'd take care to design enemies in such a way that the challenge they offer is consistent with who and what they are within the setting. Ever wonder why a spider the size of your car is much easier to defeat than a common man of Whiterun who turned to violent crime?

My ass has been handed to me various times.

The level scaling is fine. If anything, I've found moments where the enemies are too strong (not that that's a bad thing).

The problem with level scaling is not how hard or how easy the game is, it's how non-immersive it is, and how pointless it makes discovery and accomplishments.