I don't think it's that hard of a fix for Smithing, though. Lower tier items should grant less XP, and merchants should never have hordes of higher tier materials laying around. After Steel, you should have to start hunting around for material to make Dwarven, Orcish, Ebony, and so on. I'd even remove Daedric entirely, or at least make it part of some quest line.
Of course, they'd have to rebalance the supply of materials in the world..... I know that, advancing up the Light Armor side of the perk tree, I certainly would never have found enough materials to level the skill if I couldn't use Iron and Leather for a great deal of it. As it was, I had to buy my first bars of Quicksilver from a shop to make & improve my Elven Sword (this was at a level appropriate time - I'd been finding Elven armor bits periodically, but hadn't gotten a sword yet).
It may be that I explored in the wrong directions, or just was unlucky. But as I've found it, there aren't nearly enough sources of Malachite/Quicksilver/Moonstone to level (Light Armor) Smithing up from, say, 40-100. Especially if you take it off the vendors.
While I like smithing, it makes it a bit too easy to just whip up the higher tier arms and armor, making any possible quest rewards or exploration less appealing. It's a little less about balance than it is risk and reward - why bother searching for a Daedric Sword when I can just cook one up so easily?
Again, my experience may be different because I went the Light Armor route, which tops out at Glass weapons. But, still - as I mentioned in the previous thread, I leveled smithing "as I went", using 99% materials found in the world (bought a handful of quicksilver and moonstone when my own supplies were lacking or nonexistant). Even using lots of Iron and Leather, I was only making items at the same levels that I was finding them in the world. I didn't hit 100 Smithing until level 48 (having buckled down and decided to make that final push from Glass to Dragonscale, which involved doing alot of Mine raiding for materials). The only smithing "bonus" items I used were ones that I'd found - a small number of potions, and +20% gloves and necklace.
Luckily, I found a Daedric Sword in a chest, somewhere in the mid 40's. With my equipment and potions, I've been able to improve it to "Legendary" - around 100 damage with the One-Handed skill and bonuses I have on my gear.
It's enchanted with 1-second Soul Trap. Because that's more useful than the somewhat poor damage enchants I could put on the thing.... when I want to attack with special effects, I use enchanted weapons that I've found. Again, as I mentioned in the previous thread, without high-powered Enchanting skill (near maxed, perks, bonus potions, etc) you can't craft gear better than the things you find in the world - their enchantments make a big difference.
So yeah... perhaps Smithing could use some tweaks (having different items give different amounts of increase, so there's a reason to make more than daggers of whatever material you're working in, for instance). But major changes (like "Iron only works until skill 40") would require other parts of the game to be rebalanced as well.
And the skill as it is, isn't "broken".... depending on how you use it. Personally, I don't find min/maxing or powerleveling to be "playing naturally" / "common sense". Maybe for some people (ones who're perhaps overly fond of that playstyle, or are used to games where it's the required playstyle) it is. Needless to say, the two different viewpoints will look at Skyrim's systems and have completely different reactions to it.
edit: not sure if it provides any insight into playstyle, but.... I only got around to doing the Civil War and the later half of the MQ after level 50. Sidequests and exploration are just so distracting.