But I fail to see how Skyrim doesn't reflect this. I'm currently playing a level 17 warrior-type character. I oneshot wolves, no exception. I can take 2-3 bandits at a time, 4 or more start to become a problem. A giant is impossible to kill, and a dragon is extremely challenging and requires me to use every tool I have to down. I enter a tomb, and make short work of ordinary draugr, while advanced ones give me trouble, and at the end of the place, I tend to find an overlord who forces me to reload a few times.
It fails because the foes are downgraded or upgraded to your level, because a dragon you encounter earlier is weaker than a bear you encounter later/in a higher-level zone. Right from the start I can go and kill five bandits without trouble while I'm supposed to be an inexperienced greenhorn, and absent materials that is supposed to exist don't come up until I magically reach a hidden treshold.
I talk about a believable/logical world, you answer that Skyrim already does this, while it actually scale the world to you level, which is everything but logical.
But once again, Skyrim reflects that. Your character does progress - sure, enemy hp and damage is somewhat scaled, but even if that happens, you're still taking less damage because you took armor perks, and you're not stuck swinging your sword like a farmer because now you can behead people in one swing, parry their blows more efficiently, rush them down with your shield, summon 2 pets instead of one, backstab them for most of their health and so on.
You just don't become superhuman, but the entire point of the scaling is that: allowing you to improve your character while keeping the world consistent.
If it's to keep the character to become too powerful, then just make it so that a level don't bring so much power, and/or make level harder to gain (the amount and speed of levels gained in the start is downright ridiculous). But giving much power to the player on one hand while giving also power to the foe in the other is just rather pointless.
In fact, I'd much prefer this situation, as the scale of incease in power by several factors it's not really immersive nor believable.
Mind you, I always disliked scaling - I understood the rational behind it, but felt it wasn't a fair tradeoff. I'd be willing to sacrifice immersion for better gameplay in Morrowind and Oblivion. I feel like Skyrim pulls it off finally. Yes, level scaling still has negatives, but this time they are outweighted by the benefits. It works.
It still brings lots of negative, and the benefits it brings could be better served by a different design.
Well you essentially have that, the only difference is that rather than dictating what level things are based on some generic and ultimatly very predictable formula that people would figuire out, write wiki's and guides on to show you where you should be at which level creating a path for you to follow. In Skyrim you can go whever you want and know that the content will be appropriate.
And "going wherever you want and the content will be appropriate" is actually horribly boring, breaking the suspension of disbelief and anti-immersive. It's not an advantage but one of the worst liability of the system. What's the point of exploring and where is the feeling of adventure when you know you're being catered for ?
I see this kind of logic to where people try to make comparison... bear is strong than wolf.. mamamoth is stronger than bear. thats all well and good when you can actually apply some real world logic to it.. but where it breaks down is when you start making things with no real world knowledge, rather than animals for example NPC's and monsters. Orc is stronger than Hobgoblin? Mages stronger than warriors? Necromancers stronger than Spear wielding Kobolts? What level is a Kobolt? An Orc? Hobgobblin? How does a player determine their strengths? Die and relaod? Does that sound like an emersive way to introduce people to those monsters... via game reloads after being frustratingly killed and pulled out of the emersive gameworld?
If the game is consistent, eyeballing is a good way to make a rough assumption about the strength of the creature. Fluff and lore is the other (and complementary) way. In the end, it's more immersive than just having the numbers going against common sense.
And yes, sometimes you may have a nasty surprise, like some old guy who looks weak and happens to be a powerful wizard. So what, isn't it actually a good and fun way to have some measure of unexpected ?

The point here is that this is where Con systems in MMO's come from, so that you can identify the releative strength of a random mob you run up on because without it you would effectively have to attack something and see if your strong enough to kill it. The same thing would happen in a single player game. You run up on a keep full of bandits? Do all bandits have a default strength or level? If not what level is this keep? Is the only way to find out to go in get killed and reload the game to a save when you die than guess at what level you might be able to come back? What about questing? Why would an NPC give you a quest for a level 20 dungeon when you are only level 10? And how would you know its a level 20 dungeon unless the NPC revealed to you.. hey this is level 20? Again emersion issues.
"level 20 dungeon" is by itself somehow weird. A dungeon is not by itself "level X", that is only the shortcut we use to say "some pretty dangerous creatres lives here", and if the creatures are logically strong, you don't need to slap a number on the dungeon to make an adequate guess. If a building is home to the orphanage of the village, you can safely bet that unless there is some contrived happenance (like "this old hero just retired to look over it"), it's a pretty easy prey. If a keep is home to the elite guard of the lord of the land, you can bet there will be tough opposition.
Segmenting zones in arbitrarily numbered tags is a bad habits that was born out of lazy design, it's not something "natural". But it has caught like a bad disease and now we see people finding it normal that some battle-hardened elite guard is in fact a level 2 rookie because he's encountered at the start of the game, while the run-of-the-mill footpad is a highly experienced master at fighting just because you encountered him later.
I would challenge you to name a game in which a static system actually works in an open world enviroment? I would be curious to have an example of what you see as "the right way" to do it.
Fallout 1 & 2.
Hardly possible to make a game more open, and yet not a single speck of scaling in the system.