Level range scaling i.e the Fallout 3 system is best. Here is why:
When I first played Oblivion I had to mod it as I did not like the scaling, I thought MW static approach was much better. But after playing Fallout 3, I realized that scaling was good if used properly. OB overdid. In MW after level 20 something the challenge ended. But I still did not think it was a must, now after playing Fallout New Vegas, I think scaling is a must for open world rpgs. In linear rpgs there is scaling by default, as you progress the weapons/armor get better, the beast get harder,etc But with the open world design you lose that with out scaling(level range scaling) that sense of progression.
Also encounters are less fun because there either too hard or too easy. In Morrowind the battle system was not great so it mattered less but as combat gets better is matters more and more. Take Oblivion for example, I recently tried playing Nerhim(?). When I started out the monsters were easy and I just bashed the attack button as fast as I could, I thought to myself well I guess Oblivions combat has not aged well I use to think it was the best rpg combat out there, oh well. Then later on I fought some stronger guys and suddenly things changed, no longer was I spamming the attack button but now I was using the block button, dodging attacks, trying to figure out the best time to use a strong attack or perhaps some quick weak attack spamming is enough to finish this guy off. Skyrim will use an even more elborate system than Oblivion, I don't want to spend my time spamming the weak attack in Skyrim because I have reached x level and everything is a joke, nor do I want to be confined to a small area of the world because if I go any were else I will die in one hit.
Now as I said at the start Oblivion did not do scaling well(I used frans mod). Total scaling is bad, but I think the way Skyrim is going, using a level range scaling system like Fallout 3 is good.
These are my main reasons for scaling:
-Surprise factor during replay, if all chest are static you learn whats in them and you lose a lot of the fun factor in finding them.
-Better challenge curve, things don't become lame when you reach x level. Even the best combat system is lame if everything is a pushover. And you don't get overly frustrated by everything being to hard.
-Better loot curve, as you get better you get better stuff, long ago when I was a console player I was really into the Final Fantasy games, and it was great the steady progression of better and better stuff. This was lost in MW, great more crap, oh whats this, more crap,etc
But we don't want to go overboard like Oblivion, I want a system that still does stuff similar to more static systems like:
-Sense of getting more powerful, its always a lot of fun squashing some beast that a few hours earlier you had to run for your life from.
-It adds a great dynamic of risk/reward, you take a risk and get rewarded appropriately. Like in MW were you managed to sneak past tons of powerful beasts, then found a cool new sword for all your trouble.
-Realism/immersion makes me feel more like this is a living world that would function whether I am there or not.(though when I was younger I never understood why as I went through a linear rpg each new area always had stronger beasts and better loot)
So to get all this a level ranged scaling system like Skyrim will use seems best. Fallout 3 had hand placed loot and tough encounters & places yet gave you a lot of freedom from the start. And no scaled unique items, which is absurd.