Generally, unless it's in term of graphics, realism is (at least here) often very frowned upon. Now sure, I know TES is a fantasy series but that doesn't mean it has to avid realism at all costs.
But I think the main problem is how much weight the word holds and that it sometimes gets understood wrong. When talking about realism most of the time it does not mean 100% ultimately realistic, there can and should still be deviations from full realism for the sake of playability.
This is where the other word in the title pops in, Believability.
Elements in a game don't have to be realistic in order to be believable. In that it has to be said this is very context dependent but it's when that willing suspension of disbelieve is stretched too far that things become flawed.
In Tomb Raider for example you can accept that Lara can jump 4 meters with just a 2 meter sprint and hold on to ledges indefinitely, but it wouldn't be believable if she'd survive getting chomped by that T-Rex. We can accept that Mario grows twice as tall when eating a mushroom, it would be hard to take if the same happened in Mafia.
And here is the problem with TES. Being a fantasy series and having magic in it makes some things a bit more lose but that has a limit.
My often stated example there was the “mountain lion vs. me with bow and arrows” aka “killer pincushion”. I was standing on a rock and just plastered a mountain lion with arrows, over 50 hits, most of them right in the head or chest and that beast was A barely damaged at all and B still attacking me like nothing ever happened. All because I had not used a bow until I was level 9.
Then again had I trained with a bow from the very beginning on and got the most powerful I can find I could easily instant kill someone by a single hit in the leg.
2 things I personally call “toothpick tossing” and “wooden nuke” in respect of their effectiveness despite there not being such a big difference between the actual weapons and projectiles
This could very well be fixed, not by simply making bow and arrow more powerful, but by having a locational damage and injure effects system.
And no, it wouldn't have to be “realistic”. A hit could cause the affected limb to be less functional, it wouldn't have to leave permanent damage however. A hit in the chest could cause you to lose breath from hitting the lungs, but different than in real life this could heal within a “short” amount of time (a few days in game) and don't leave any permanent damages. This is far from being realistic but in terms of gameplay and setting it would be believable.
Hell even a direct hit in the head with an arrow would not have to mean instead death, if it hit too far off center or didn't have enough speed on impact it won't be a killshot and again in terms of gameplay such a hit could still be survivable with no or only minor permanent/long term damages.
And there are more things that could be added to this.
-How come a fireball clearly sets something on fire but leaves no burns and burn wound effects at all?
-Why is magic which is so powerful and readily available only used to kill each other but never for anything practical save for some very minor exceptions?
-Where do all the ingredients for bread come from if there's maybe a total of 200 stalks of wheat in the entire game world or apples when there are no apple trees?
Though some thoughts are more a design problem that could still be avoided with either just putting it into the game (fields of wheat, apple trees) or a bit of “effort” (fire actually leaving burn marks). But they all contribute to the believability of the game.
So that is basically what I wanted to say on this, I think a lot could go smoother if we didn't so much focus on what's realistic and what not but what is believable within the game world and in terms of gameplay.
EDIT:
http://www.gamesas.com/index.php?/topic/1116406-realism-and-believability/page__view__findpost__p__16396234
To define it a little further, Realism does not mean "like real life." Many, many times I've seen people react to the word Realism with something like "this isn't the Sims". Not only is that jumping to an extraordinarily ridiculous conclusion (with exactly the same amount of logic I could argue against fireball spells saying "this isn't Mario Brothers", or your character's ability to wear clothes saying "this isn't real life"), but the Sims is not a game I would apply the word Realism to in the first place.
As was said, a lot of it is believability. It's making things behave like they're supposed to. Is shooting a fireball realistic? Of course not. Is it Realism? Yes, because this world has magic. Further realism would be to allow the fireball to burn things, instead of just causing damage and vanishing. This is realism that simultaneously improves gameplay, giving you more options and strategy with fire.
I've seen a lot of people argue against realism as a whole, clearly not knowing what the word means. If you want to banish realism, I'll have to take away your sword's ability to cut things, for one. Whether a certain element of it is good or bad is something that has to be discussed by itself, since the position of "all realism is bad and gets in the way of gameplay" can only be defended if you literally want the "game" to be a mess of indecipherable chaos you have no control over.