The spell itself is tedious and dull. Sure, you could sit around casting it, waiting for your whole magicka pool to regen each time (because if you're trying to abuse transmute, you're obviously pretty low level) but its quicker to just find a dungeon, murder everything in it, and steal its pants.
Quicker, and likely more profitable to boot. Finding one enchanted item will easily be worth more than a cartload of gold ingots and even just a few sets of low-end armor can compare quite favorably.
Strictly speaking, from a chemistry angle, 1 iron ingot should become roughly about half a silver ingot, which would become about a quarter of a gold ingot, if my periodic table isn't lying to me and you really want a good reason to go 2 to 1 on conversions.
You're assuming that the ingots of various substances are constant-volume (i.e., an iron ingot and a gold ingot are the same size), but they're actually constant-mass. All ores and all ingots have a weight of 1 EU (Encumbrance Unit), regardless of material. The greater density of silver and gold means that those ingots are smaller, not that you need to transmute more iron.
On the discussion of "the point of alchemy" historically, nobody has mentioned the spiritual side yet. The whole "lead to gold" thing was about purifying your soul along with the metal. The reason, then, for only being able to transmute iron -> silver -> gold is that, at each stage, the metal becomes more "noble" and more (spiritually) pure. I'm not sure that any other raw materials have a similar relationship. And "equivalent exchange" is purely an FMA fabrication.
In any case, I don't see any problems with Transmute Ore as it stands in vanilla, since there are other, much more effective, ways to get rich quick. I don't think that any pure nerf to it (cooldowns, take a million HP damage every time you cast it, 2:1 conversion ratios, etc.) is called for. I could go for a chance of failure with random wacky results, but that's because it would be more interesting and more
fun than the spell just working every time, not because I think the spell is overpowered.