I've seen a similar idea thrown around on a couple threads, but I wanted to give some due respect to ideas regarding equipment changes, especially with level scaling on equipment release and their availability.

It is kind of silly that equipment scales up as you level - things should not just appear because you're ready for them. Instead, I suggest having these things be available at merchants (perhaps in reduced quantity) at a high cost. This would obviously have to function with the price fluctuation ideas many people are suggesting for a full economy mod, which I think sounds fantastic. Most people running around Skyrim would never get higher than leather or some combination of leather and scale/chain armors.

Higher quality/exotic armors should be comparatively rare while questing, and be mixed among other armors - it should be highly unusual (and I mean like boss/rich NPCs) to be decked out in a full suit of Daedric armor, for example. In response, I think more frequent quality differences would also add some depth to realism, including armor qualities lower than average. Store-quality shouldn't be baseline for things like scale, chain, or steel armors found in the world - some of these items should be poor quality, and some should be fine, superior, or exquisite as well. If possible, the equipment should be running the gamut. This would allow for some difficulty scaling on the equipment you have and help keep the currently lower-level armors like leather, hide, or iron useful for much longer. I groan whenever I see people running around this rugged, harsh, even brutal medieval world wearing shining, golden armors in perfect condition.

I know this has also been mentioned before and I'm sure some people are going to handle this, but it gets damn cold up there. People would be dressing in layers - let's have clothes under our armors, and non of the bare skin things going on. Most people would be wearing furs of some sort incorporated with their armor for warmth (I won't lie, I think the Elven and Glass armors look utterly ridiculous running around this game, but c'est la vie, the game is amazing regardless). That is more of an appearance/modeling issue than a balance/scaling issue, of course, but it's worth mentioning.