The freedom of the Elder Scrolls is the freedom to do what you want within the constraints of the universe in which your character lives. A player can not fairly complain that he lacks freedom because he cannot fly into space unaided and smash comets with his fists. Likewise, it takes away from no one's freedom to make it so that some things are always more powerful than us.
I find the OP's idea more choice-enabling than yours. In Morrowind, and in Oblivion, our characters eventually grow so strong that nothing challenges them. The game effectively ends because the challenge is over. Although there are ways for us to play our roles so that we don't become overly powerful, those methods are restrictive. On the other hand, if the game keeps a fair quantity and quality of badder-than-us (or even as-bad-as-us) things around, you can play your role however you like and not have to worry about the game ending because of it.
Again, let me restate the obvious, having choices and having freedom are not the same terms to use when discussing this issue semantically. For instance, in the US, I have freedom, but that "freedom" doesn't extend to me being able to become master of all types of medieval mêlée weaponry. Could I try, yes. But I probably don't have the capacity to master those skills, and most people in our world don't. Hence that is an example of a choice that IS available to ANY player in TES. Because that is a choice, and freedom is simply something restricted/imposed by an authority. The type of "choice options" I'm talking about for TES include my ability to become master of all combat arts, if I choose. I don't see the word freedom to describe the same thing as having the option to be the best at anything if I so choose. And yes, before you argue, I realize it is a semantic debate, and that we were basically saying the same thing anyway.
OT: To counter your second point, I would merely state the obvious - Which gives me more choices? Not being able to kill certain bad guys, or being able to kill every last one? Your idea of limiting the player to not be able to take on some foes is MORE limiting of choices than if you let the player choose to beat them or not. By your logic, in the KotN DLC, we would not have been able to defeat Umaril at all, and we would simply be told "If you fight him, you'll lose". Would you rather have been told that, and just had the quest end? Then who would face him, if not you, the player? You think an NPC should take over from there or something?
Also, I really don't get your last sentence. First off, the game NEVER ends unless you delete your save. Secondly, How does the concept of knowing there exists some bad dude out there I can't beat help me play a role in any way? What if I want to play the role of the unstoppable hero?
My idea: The system is fine as it is. If you or I want to RP that we can't beat someone, then fine, we can do so. But if either of us (
playing our own games, mind you) wants to go defeat him, we should be able to train our skills up, practice, and load up with supplies to take on the epic quest of owning said bad dude. That is completely fair to both your play style and mine. Not to mention we can do the opposite - You can be the unstoppable hero, and I can RP not being able to win against bad-ass enemies. IF WE SO CHOOSE.
Also, side note: Something I was just reminded of. There are characters, enemies, and beings throughout the TES world that we can't beat in combat. i.e. Sheogorath, Mehrunes Dagon, The Nine Divines, etc. If there ever comes a special time in any TES game where we can weaken, banish, or subvert the power of any of these types of beings, the hero can take it. That's how the MQ's have always gone, pretty much. So yes, obviously, we shouldn't be able to rule the universe. But we should be able to kick the ass of all but the most powerful beings in the TES universe according to our abilities we've worked on, and the fact that we are typically a prophesied "super" hero.