Regarding battles with things like daedric princes, the way I see it, they are immense and incomprehensible. The giant form you see is likely only the portion of it being presented to you, and only the portion the character can comprehend. Its form may well span across multiple planes of existence, with Sheogorath fighting Jyggalag in a battle of cosmic energy beings across 7 shades of reality while you're fighting him in one.