I'm of the opinion that the first part of the MQ is best done as early as possible. You can...
Spoiler get through the Battle for Kvatch at a low enough level to keep the NPCs there alive, and then leave Martin at the Encampment until you're ready to continue.
I think the MQ ties together nicely with one or more of the guild quests. You have to run all over Cyrodiil anyway, with all the quest lines, so you might as well accomplish more than one thing while doing it.
As for the daedra getting more difficult, your character should be getting tougher as you level, too. There's no reason that fights should get harder. My current character is in her mid-teens level now. When she started the MQ it was taking her one poisoned bowshot and a single destruction spell to bring down a stunted scamp. Now it's taking one poisoned bowshot and a single destruction spell to bring down Clannfears and Frost Atronachs. The difference being that her Marksman skill, her Alchemy, her bow, her arrows, and her Destruction skill have all gotten correspondingly better.