Ehm, they do afaik. When you get too close to an archer they switch to a meelee weapon, often just a dagger. And I do get the feeling AI archers try to keep their distance, especially when accompanied by others. If you watch the tests I provided above, you'll see that 20-30 meters seems to be the confusion zone against plated metal armor. Above 30 meters, there would be no effect at all. Below 20, you can expect reasonable penetration.

Pretty much man, pretty much. For combat to feel real it would either have to go far beyond what any game I am familiar with has done. Or take the beaten path away from realism, because in all honesty with current technology and trends you just aren't going to find realism.

If the system is well done, you could have a "normal" difficulty mode where your character automatically blocks / dodges all attacks (without moving too much; center mass hits would not be dodgeable, otherwise the system might be buggy, e.g. "dodging" an arrow by jumping off a cliff), and you could have shields for additional protection against arrows (to avoid the center mass situation; of course the shield comes at an expense; you can only have a one handed weapon with a shield, and you could not perform stealth attacks as easily as with only a dagger). Simply get rid of a system that assumes everyone can survive huge amounts of hits, by replacing health with dodges and the use of shields (and parries of weapons, but this thread is about ranged combat mainly). It'd still be the same basically. The high level character would survive 20 attacks and the low level character would survive 2 - the difference is that the high level character blocked 18 attacks, the low level character only blocked none. This'd also make fatigue more important. Health would be something hard to regain, an injury would be a problem for days. But injuries would not happen often; a fight is mostly about the weapon skills and about fatigue - the one who first gets exhausted will perform worse. That's true for melee as it is for ranged combat.

The only thing that'd really change is that agility would become more, and strength less important; but with some refining, the huge two handed weapon in the hands of the strong orc would still not be underpowered; such as special attacks that require a certain amount of strength, but then give you a higher chance to just crush through the enemies defense; the ability to stun the enemy with powerful attacks, the ability to make the enemy trip and fall even through he blocked a strike due to the power.

Combat would, as a nice side effect, also look better. Like a movie, basically.
And it would be not a tiny bit harder. It would however be a thousand times more immersive.

And it's not hard to implement. Blocking already is in Oblivion, and a dodge animation would not be hard to do. Then add some more animations so it looks more interesting, and have the block animation depend on the attack animation (as in just about every boxing game etc.), and the dodge animation depend on where the arrow would hit (just as easy to do), and... profit. Okay, sometimes the player would move a bit just so that the animation does not actually dodge, but that's easier to ignore than potentially lethal wounds only causing the loss of a few HP EVERY time.