So they create a character that is level 100. Meaning to ever beat them they would have to make it possible for your character to be a level 100...then at level 100 your character would again think it's too easy and want a NPC or creature that was more challenge...and on and on it goes. It must end somewhere unless you create characters that will always scale to a higher level than you.
Generally when you reach upper levels you have completed most quests and it's time for a new start anyway. The other option to scaled leveling would be to have the game end so that you could no longer play after beating the toughest beast in the game. Fans of TES don't seem to like that either.

I agree with your points in general (especially about starting new characters), but there's room for improvement in terms of the amount of challenge for a given level.
For example, I'd say that even on Master, PC > NPC at the same level. An NPC probably has to be 5+ levels above the PC, maybe more, to be equivalent. This is due to AI, player advantages in crafting, etc. I'd personally like to see better (not Daedric!) gear on enemies occasionally, and see more spawns as you gain levels.
I've played ~6 characters on Master, and I see the same pattern with every type of character. Levels 1-10 are challenging, just about perfect. Levels 11-20 are easier on average, with the occasional over-the-top frustrating fight. After level 20 everything becomes easier and easier. There are some minor exceptions, like Dragon Priests and Ancient Dragons, but they're very rare. I see this despite using rules like only 1 crafting skill per character. While I agree with people who want to see and feel character progression, I'd personally like to defer the powerful feeling to level 40 or so. BGS approximately doubled the (soft) level cap, but didn't alter the challenge curve enough to compensate for that.
I don't consider myself a hardcoe player, so if I'm having this experience, there have to be a lot of others as well.