The dog companions in the game are clearly Irish Wolfhounds, or Skyrim Wolfhounds because apparently TES is on another planet....but anyway, The Irish wolfhound is technically the tallest dog breed you can get. They were used as war dogs in the Roman Empire, and their breeding dates back to 391 AD. These dogs were EXTREMELY valuable given their beauty and power, wars were even fought OVER them.
The reason these dogs were in so high demand is because they were Wolfhounds. That does not imply that they looked like wolves. These dogs were bred to hunt and kill wolves single handedly. They were too good at what they did, and drove the European wolf to extinction by the 19th century, which caused a huge decrease in their own population, as prey and need for them waned. The breed, however, was saved due to some efforts on the Irish government to preserve their history, and the dogs can be found today.
I honestly don't think they could've picked a cooler dog breed to include in the game.
Wolves aren't that big a deal, when taken alone. A number of domesticated dogs (for shepherding, guarding, and so on), are bigger and more powerful than wolves.
The wolves thing is that they usually are in packs, and like most predators they target preferably the weak/youth when possible.
I don't especially think a dog is "cool", because it has been more or less "engineered" by man (through breeding), or because it drove wolves close to extinction in western europe. This poor dog was made as a tool by man, nothing more.
Still, they kinda fit the game background and setting, I agree on that.