for clarification, i wish that skyrim had a more developed blood/breathing system that was precise. as well, as ladyonthemoon states, you absolutely get used to judging your health and DiD without a hud on master/legendary is undeniably possible as that's what i do. (death is rarely due to misjudging my health.)
let me say that again: you absolutely get used to judging your health. based on enemy type, weapon type, pc level and hits taken. (one thing i did early on and actually did while doing a recent Legend DiD run from the beginning for the first time is keeping the hud on for a few battles or checking your stats after a battle.)
i don't have great surround sound, but, like turija said, with the music off you know the enemy direction since beth did a good job of making the sound louder when you're facing them.
as for aiming, it seems like i take more time lining up the shot and missing more when i play with it on, instead, of just judging and letting it fly. striking moving targets from a distance is so satisfying.
picking up items accidentally just isn't really an issue either at this point in time.
having the hud on makes the battles much easier for me, but, i'll take the exchange every time. as for sneaking, i can't even consider myself a sneak-thief if i have the hud on. how difficult is it to steal something when all you have to do is look for the magic eye?
i'm glad its an option, but, in the next game i DEMAND, well, lol, hope beth does a much better job in allowing us to customize the hud/music options.