I hate to nitpick an opinion, but here I have to.
Your problem here isn't the leveling system, it's the way the gameworld scales. That's a problem with the design of the gameworld, not the leveling system. For instance, if they had set it up so that every few in-game weeks the enemies changed, in the same fashion as they currently do in Oblivion, you'd still have the same problem of them suddenly turning up, even though leveling is removed from the equation.
That said, Abhi's made the same mistake.
I don't have any problems with the leveling system itself, my problems are also with the design of the gameworld. Namely that it's pretty much built to stop at 20-25 in the basic Oblivion game, going up as far as 30 with the Shivering Isles. The fact that the character can reach higher levels than that was apparently overlooked by the developers, which frankly can't be defended on any grounds. The fact that once you reach level 20 in vanilla Olivion no new weapon or armour types appear when you can reach somewhere in the region of level 50 is just ridiculous.
Had the game been designed to properly account for this then the increase in power from leveling, often as much from new gear being found as anything else, would not seem nearly so pronounced.
But if I'm honest, it would have been nice to have a Gcd style leveling system...