Regardless of the reasons, a contributing factor IS console limitation.
The average computer has 4GB of dedicated RAM and 1GB of dedicated VRAM, along with 2-4 core CPUs, The modern gaming computer is vastly more powerful then the current consoles, which have a measly 512MB of memory for the whole system. PS3 has a 3.2GHz 6 cell processor which is rarely coded for because its time consuming and difficult. And the 360 has an outdated 3.2GHz tri-core processor.
Realistically, all Sony and Microsoft need to do is release consoles with upgraded hardware, but as long as the current consoles are still making money, they won't do anything about it.
Current consoles are what, 5-6 years old? That is ANCIENT in computer terms. Just looks at the issues RAGE was having with console hardware. Consoles are showing their age badly. I believe that Skyrim will be the last, nearly the last, quality game we will see on consoles.
It still doesn't matter. It's the developers' choice to go ahead and cut the armor slots for a bit faster rendering performance. They choose the slightly better graphics over the slightly better customization. I am not and never was arguing that the current consoles were not outdated, I'm arguing that it still doesn't matter. Oblivion had more armor slots than Skyrim on the same hardware. Morrowind had even more on far weaker hardware. Daggerfall have even more on even more weaker hardware. It's not an inherent limitation of any console, it's Bethesda choice to prioritize certain graphical improvement over maintenance, at least, of the same gameplay options and as I said, and it is fact, even when jumping to new hardware (Daggerfall to Morrowind transition, Morrowind to Oblivion transition), they STILL cut the armor slots, the town sizes, the NPC amounts, etc. It's Bethesda choice to further prioritize graphics over content, not any piece of hardware's and if history repeats itself, TES VI on the next-gen consoles won't go back to a high armor slot amount.
That statistic has been declining for years across several game transitions despite hardware transitions. This is simply what Bethesda do... what much of the industry do. The solution is not to sacrifice more and more game quality to try and stem the inevitable fact that consoles, overall, as with all hardware, cannot keep up to the latest hardware in graphical rendering techniques, so just let the hardware fall behind on graphical settings a tiny bit more, don't irrevocably (fact, post-Daggerfall, Bethesda have never added more, in terms of quantity of in-game objects, buildings, NPCs, etc., to render at any given time in a successive game despite better hardware) mar game design. The consoles do not force such "compromise", the developers do. They do anything to squeeze even just a bit more out of hardware, even encroaching upon game design. They shouldn't do that and it's not the hardware's fault that developers don't see the fallacy of this.