The game can still be challenging without level scaling, if not more. But yes if you want challenge from the same low-life bandits you won't get it and it's perfectly rational.
It's rational in D&D. It is not in a (prevalent) number of RPG systems. In fact, the idea of keeping a guy pointing a gun at you being a threat no matter what level you are is the cornerstone of most anti-D&D systems. And it's the goal Skyrim and TES games have too, verisimilitude. You didn't grow arrow/daggerproof skin. A bandit can still kill, as you're a man and 2 feet of steel in your stomach WILL kill you.
I can't understand how people like the following:
1.-The appearance of "upgraded" bandits, mages, draugs etc as soon as you reach a certain level. Where were they before? How can they have been upgraded to match a damn dragon slayer's powers?
2. -All npc casters in the game suddenly learn higher level spells as soon as you reach a certain level. On my mage once i got expert level spells the npcs suddenly learned adept and expert spells themselves upgrading their repertoire.
3. -Loot depending on your level - not on the dungeon of difficulty. I could guess what quality of gear i would find in a chest before i opened it! How doesn't this svck?
4. -Dungeons being the same level as you. I've completed about 90% of every single cave/ruin in the game and until now, in every cave i entered, i completed it because it had enemies depending on my level.
5. -Merchants suddenly upgrading their inventories. They must have been hiding these items, like the rest of the things i mentioned and waited to show them to me when i leveled up. Not to mention that there is no point in buying anything from them since i find exactly the same quality of items i find in dungeons - all the same according to my level.
6. -Killing dragons etc at level 5. Do really people need to kill dragons at level 5 to feel "free" to do anything? Dragons are powerful creatures, wouldn't it be more rewarding if they had a high standard and high level non-scaled loot in the case you manage to kill them?
Personally these just break my immersion:
1. they didn't upgrade. They're the same guys, as testified by how their gear barely scales (and it only does in order not to be completely pointless as a reward). Level scaling doesn't mean the entire world levels up with you; it means your leveling up isn't represented in a 1:1 growth in power within the actual game's consistency. At level 40, you're not 40 times more powerful, but instead of stifling your progression, giving you 0.x increases in damage and armor and generally making the leveling process feel irrelevant, the system gives you granularity in the choices you make leveling up, and then "updates" the world to your level (within limits) to keep your "power level" consistent with the premises of the world - which is that you're human and taking 4 guys with swords and daggers at a time will always be a life or death situation.
2. I didn't experience that. Casters are few and far between in Skyrim, they tend to have fixed spell-lists (for minibosses at least). If you're talking about random necromancers and similar monsters, I've rarely felt I was fighting an archwizard.
3. It doesn't svck because dungeons aren't on a progression ladder. The alternative would be requiring the player to tackle quests in the correct order in order to get the correct loot, which is NOT what TES is about.
If your criticism was that the game should work like it does, and then have a level cap - say 50 - and a few "end-game", nonscaled level 50 dungeons that contain legendary relics you can't match elsewhere in the game as rewards... I would agree. But the problem isn't scaling - it's not having endgame content, something I feel Bethesda could safely introduce without breaking the system and actually improving the games.
4. You were lucky then. Monsters scale within level ranges, meaning you may enter places you can't clear because the mob's minimum level is too high compared to your actual level. This is expecially prominent at Master level, when even a slight advantage for mobs can be lethal, expecially at low levels. Around 40 or so you tend to become powerful enough to face everything, but isn't that what people wants?
5. This IS an immersion breaker, but a gaming necessity. You need the world's economy to evolve with you, or trading will progressively become harder for the player. The only solution would be having elite vendors in elite areas, but once again, that's not TES. You can try to rationalized it thinking that as you loot and sell more powerful items, you make the world's economy evolve, or simply accept compromises in a videogame.
6. Once again, you need to understand the kind of RPG system TES is inspired to. A level 50 character isn't magnitudes of power stronger than a level 1 character. If at 50 you can kill a dragon by sticking a piece of metal in his neck, you can do so at level 5. A minimum of rationalization may be helpful here: at level 50 you'll do with skill and strategy and fearlessly, while at level 5 you probably met a juvenile dragon and killed him with a lucky shot.