The key to understanding our argument, though, is your exact words above: "I don't like having to hold myself back in order to not break the game through normal level proggression". In short, having to gimp your char in order not to break the [crappy, nonexistent] game balance. You shouldn't have to look at some shiny new sword you've found with better damage, and think "Oh, I'd better just sell this and keep using my inferior weapon, or I'll be too strong". You shouldn't have to look at any crafting skill and think "I'd better not use this at all, or if I do, I'd better be sure not to be very good at it, or I'll be too strong". You shouldn't have to be forced to plan your character to be much weaker than it's possible to be, in order to not quickly overpower even the highest difficulty in the game.
On the contrary, when a game is done right, the hardest difficulty will naturally be a challenge for any and all, even those who've built the strongest character it is possible to build, with all the best of everything you can legally get from playing normally. And if your idea of fun is to gimp a char and force them to have a harder time making it through to increase your personal challenge, then you can also choose to do that at one of the lower levels, which if balanced properly, would provide just the right challenge for those kind of characters. As it is now, you have to settle for less than the best of everything readily available, just to have a challenge on Master. And that just isn't right. It's just poor/MIA game balancing, pure and simple.
If you are playing on Master, then "your idea of fun is to gimp a char and force them to have a harder time making it through to increase your personal challenge." Whereas playing on Master is clearly gimping, not making intensive use of enchanting, or alchemy, or smithing is easily explained without resorting to specious claims of "gimping." Some players use those skills sparingly because they don't enjoy using them a lot. Other players don't use those skills because their characters are focused on becoming strong in other other skills. Someone playing Conan probably won't play Conan stooped over forges, arcane enchanters, and alchemy stations.
It sounds like some game-provided gimping of smithing would be good for Master difficulty. Instead of beefing the world up to suit smithing, they can trim smithing down to suit the world. The hard part is keeping smithing both noticeably useful and noticeably fun. If there is too little effect from smithing, the skill will be viewed as useless and not worth the bother. If there is too much effect from smithing, the skill will be viewed as overpowered (as some now accuse it of being). If there is just enough effect from smithing, but the effect is achieved through long periods of gathering components and hammering them at a forge, then the skill will be viewed as useless except through tedious and dull grinding (as some now fear it will be if the system is re-balanced). If smithing effective arms and armor also demands gathering ingredients and brewing potions for long periods, and enchanting for long periods, then the skill will viewed as even more tedious and dull.
Players arguing against re-balancing the system think that such rebalancing will lead to a need to grind smithing, and alchemy, and enchanting to gain any usefulness from smithing, and grinding isn't fun. They feel that the system is just right as is, because they make use of it and find that their game remains fun and challenging. They don't gimp their characters, but do what is necessary to make their characters effective. Once their character has been made effective through crafting, then they have no reason to craft more. They can just kick back and enjoy playing the character they have built. The counter argument seems to come across as there is a reason to craft more -- you craft more just because you can.