They could alleviate some of the problem in Skyrim by having random encounters/dungeon enemies wear partialy smithed gear like some enemies will randomly have Steel (Superior), some might have Steel (Fine), others Daedric (Legendary) etc. instead of them all being normal regular unsmithed armor. It would add some much needed loot variety to the game without upsetting the balance much. Or have random loot/enemy equipment have an exceptionally rare case of having an exceptionally good enchantment for your character level (you can still probably better the enchantment yourself but if the enchantment is good enough it may be a while before you can make a better version of it).
That would certain make combat and looting more interesting, however it runs the risk of marginalizing smithing since it would be possible (albeit rare) to get a full set of Legendary gear without ever investing in the skill. Unless, that is, the quality tier was capped somewhere in the middle, say at Superior or Flawless, since that would still leave room for smithing to make a contribution to item quality.
Ah, this might help: have the higher-quality items be restricted to higher-rank opponents, so that in order to get Legendary items you have to go after top-level bosses. This allows the presence of non-smithed high-quality items, while keeping the amount of such restricted so there is still incentive to make your own.
My problem is that unique loot doesn't look unique. It would be nice if there were a few more unique models included in the game even if they were just slightly modified iron swords or something.
Combine all 3 ideas and you get.... AWESOMENESS.
1) More loot variety, I mean enemies might use Steel (Fine), Steel (Superior), Steel (Legendary) etc. weapons (Same applies to armor). The quality is linear based on a 100 point scale (Smithing skill) which means that for example: Items like a Steel (Fine) sword may not have exactly the same stats as another Steel (Fine) sword, boosting item variety that you find in the wild very significantly.
2) A cap on the quality of gear enemies can be equipped with to ensure smithing remains very useful. You can still smith gear to make it better then what it originally was so Smithing is still
always a useful skill to invest in. This idea just ensures DragonBone/Daedric etc. gear can only be crafted/found on exceptionally tough high level enemies.
3) Unique appearance for all uniquely named gear/weapons.
Also, I find Oblivion loot leveling to be vastly more interesting then Skyrim's, mostly because you will almost always find something better then what you have ensuring that there is always something for you to go out and find and utilize to your benefit. In Skyrim the loot system was changed so that you will almost always never find something better then what you already have, making most loot you find utterly pointless. Sure Oblivion was terrible for magic users but aside from that I think the game is great (I favour melee anyways...)