Well, here's a few ideas I was throwing around and would like some feedback before committing. Heck, anyone could just take these concepts and use them themselves if they want too. I want to see if anyone else has done any work involving these suggestions:

fCombatDistance
this is set to 128. this controls melee combat distance. setting this lower makes combat closer, and vise versa. This is one way to go around the 1.0 limitation, by decreasing this global to make 1.0 weapon range hit shorter.
I'd suggest a value of 96 or 112. any lower will make 1.0 weapons unviable if there's any movement involved, and greatly affects creatures to where any walking speed will keep you out of range.
of course weapons would then all need new range values to make better use. but variety is the spice of life! utilizing this variable can make for some specialized daggers that require you to be right next to someone to be effective and perfect for backstabbing, yet worthless in real combat when your opponent is moving around. definately something to think about.

fCombatDelayCreature
fCombatDelayNPC
these are set to 0.1. this is responsible for how fast NPCs and creatures attack, and partially why npcs and creatures are lethargic in combat. positive numbers increase the delay, and negative numbers decrease it. setting it to -0.5 makes creatures and npcs extremely dangerous in melee, they don't pause one bit and are extremely relentless in attacks. with low agility, a player will be staggered by them in combat until death. however, it was very entertaining that the npcs and creatures are that much more difficult and attack like players in speed. so a value like -0.25 could be effective. didn't seem to affect ranged attacks all that much from my testing though. touch spells were brutal though.
definately another setting worth touching. always thought their attacks were really slow in comparison.

Anyone have experience with mods that adjust these? any positive/negative effects? I'll throw together a simple mod utilizing these upon good feedback. these changes do make a good deal of difference in combat, especially the delay tweaks. there's nothing more humbling than getting staggered to death by a pair of rats at low level. the weapon range tweak could really make weapons have a greater choice of range and utility.

RCSun's Unnamed Plugin modifies the combat delay GMSTs to 0.09.
Morrowind Rebirth sets them to 0.

Contact Hits sets fCombatDistance to 72
BigMod 2.2 sets fCombatDistance to 192
Gratuitous Violence sets fCombatDistance to 75

But I don't have any user experience with these mods.

Interesting! Looks like I got a couple mods to check out. sounds I like could have an interesting concept mod to release with the delay values at negative. That should wake up some combat enthusiasts! Only downside is that it makes everyone a combat pro, and unarmed foes tend to knock you out right away with their boxing blows.
I'll definately look into the fcombatdistance ones, i want to know how they compensated for some of the issues with setting the value lower than 80, since my testing allowed a slow character to simply avoid combat with creatures by strolling along.

Sounds like it could be a really cool mod to use. I've always avoided mods which edit game settings mainly due to my lack of knowledge and the lack of precise documentation present in those mods on what changes to the settings will do. The way you've laid it out here sounds quite intriguing.