Reality doesn't matter, Nirn isn't earth, our physical laws aren't the same - this is most obvious with magic. None of these races are human, there's no reason to believe they're not more resilient, and no reason to believe that the added effect of higher class weaponry has less to do with its physical form and more to do with the magic imbued in the material.
Sorry, but I don't buy that logic. Quite frankly, it just seems like an excuse to dismiss the concerns of those who are more interested in
believable combat. The reality is, there's no reason to believe any of those races
would be more resilient to any significant degree; as long as you're dealing with flesh-and-blood beings with normal anatomical systems, the weapons used in The Elder Scrolls world are going to cause the same types of injuries, no matter what planet you're on. Unless of course there's some explanation as to how the humanoids seen in TES are so radically different...
As for the presence of magic, I think most would agree that the existence of mysterious supernatural forces is more plausible (and accepted in numerous works of fiction where everything
else abides by the laws of physics) than physical laws which differ from ours to the degree you're suggesting. I mean, do you realize the extent to which the character's anatomy
and the laws of physics would have to be different in order to justify the significantly increased durability of what appear to be creatures not that unlike those on Earth? The same can be said for the disparity between different levels of weaponry. In other words, the OP has a point.
The liberties taken by so many developers when it comes to weapon damage and character "health" are really quite absurd and downright lazy, given the far more believable, complex and interesting ways that things
could be portrayed with current technology. The archaic, 'increase health and damage and call them a higher level' just doesn't cut it anymore. The real questions are, will they
actually defend themselves better? Will their attacks be more likely to slip past
your defenses? Will they hit you in more critical areas? Will there be
anything about the way they fight that reflects their increased skill, other than a larger pool of health and increased damage?
If combat were done
right, health and damage wouldn't have to be significantly altered, as skill would be reflected in actual offensive and defensive capabilities during combat. It would still be an RPG -- stats would still be a huge factor, but they'd be brought to the forefront and
actually affect combat in a believable way. For example, instead of randomly getting a "critical hit" bonus, you'd actually be able to hit where you aimed a certain percentage of the time, based on your skill. Conversely, the more skilled an NPC was at blocking, the better they'd be able to defend critical parts of their body.
This is how realism could still be fun. Tedious battles of attrition wouldn't be necessary to convey the "skills" involved.