I do not like using the word `realism' or compare to `real life' when talking about fantasy worlds: for example I find slightly ridiculous the name of `vampire realism' mod; what does it mean? that it removes the vampires? (it is just and example: name a part I like that mod)
I think what's meant by "realism" in this context is
verisimilitude. "Vampire realism" means, at least to me, that vampires are handled in the game in a way consistent with what we think would happen if there were vampires in real life.
The main point is fun, the second point is gameplay:
I love the idea of a skill system where the progress is based on failures because it gently pushes the player seeking new challenges: killing rats after a while will become not only boring but also useless as you'll always hit.
Casting the `1 point of shock damage on touch' spell when you started understanding a little of Destruction will be unneeded as you'll always cast it successfully.
With the normal system instead you are encouraged to seek weak opponents (for weapons skills) or casting needlessly extremely easy spells. I do not find it very fun... The problem is still there with spells: players will make impossible to cast spells in order to improve their knowledge, but since it will cost much more magika I think it is still better.
I couldn't agree more. Another benefit of a failure-based system is that low-level characters will level up faster, but high-level ones will stall out unless they, as you say, seek out greater and greater challenges.
The problem of improving by trying the impossible could be handled by awarding experience points only for failing at things which you have some chance of succeeding at. If I were designing the system, I'd give full points for failing if you had a 50% chance or better of succeeding, and scale it down if you have less of a chance than that, down to nothing if you have a zero chance. I don't know if this is possible to implement in a mod, though.