NEWSFLASH!
Encumberance does not equal pounds!
We actually don't know that. It's an undefined weight unit which may or may not corospond to a real life weight unit. If it's true that it is pounds, then yes, the in-game weights for items can be rather ridiculous. While it's true that as a fantasy setting, materials in the Elder Scrolls might not have the same properties as ones in real life, if we assume that a character with average strength in the Elder Scrolls is similar to an average human in real life, in terms of strength, a sword that weighs forty pounds would seem quite impractical. But since we don't know what the weight unit used in the game is, Bethesda can really say things weigh whatever amount they like, as long as the reletive weights of items have logic. If there's any problem with the weight of items, I'd say it's in the reletive weights of different items, and I'd say Oblivion does have some problems in this regard. For one thing, glass weapons should NOT weigh more than iron weapons, because iron armor is heavy armor, and glass armor is light, this would indicate that glass is a lighter material than iron, and if armor uses this logic, it should be consistent in weapons as well. But unmodded Oblivion seemed to follow the logic that weight should increase with the quality of weapons and armor, a logic I really can't agree with. I'd hardly consider it necessary for game balance as better weapons and armor are supposed to be, you no, better than weaker ones, so there's no reason why their advantages have to come with disadvantages as well. And if you want to give an item both advantages and disadvantages compared to another one, there are ways to do this besides making it heavier, like say, making it less durable.
For all we know gravity works differently in tamriel. It might effect heavier items more than light ones. It might attact metal more than cloth ect. Its a different world and a game. I wanna carry a lot of loot and still be able to fight and not carry a backpack.
While it's true that things in a fantasy world might not always work the same as in real life. It is usually not unreasonable to assume that if you're not specifically told otherwise, any given thing will be the same as its real life counterpart. Unless we're told otherwise, we expect a wolf in a fantasy setting to be more or less the same as a real life wolf, for example. And yes, we generally assume that gravity will work like in real life if we're not told otherwise. Even if gravity is actually caused by earth spirits pulling people down to the ground, as far as how it impacts the story, one generally expects the like reality unless noted rule to apply.
Still, I do agree with you on the game part. In RPGs, I generally like to have room to carry my equipment as well as my loot. although if weapons and armor weighed less, that would mean you could carry more loot, if the maximum weight you could carry was not reduced as well, but the point is that Bethesda should focus first on providing the desired gameplay experience rather than making the game more realistic. Not specifying what weight unit is used in the game just allows them to justify item weights that wouldn't make much sense if the game used a real weight unit.