Both, as the two aren't mutually exclusive.
It serves no purpose.... which is the point.
Orcish armor shouldn't logically be useable past a certain point, because it is made of objectively worse quality materials, and thus is objectively worse at deflecting hits then better armor.
It shouldn't be able to do anything close to daedric, dragon or ebony. Just like PA should be objectively better then any other armor except vs EMP effects.
You ask what good is something when it becomes obsolete, I ask, what good are stats in an RPG when all stats give the exact same effects no matter even if you double them? The answer is they aren't good at all, stats become utterly meaningless, like the armor stat in NV did, which is fundamentally counter to RPG design. What you are advocating for is a dress-up doll simulator, and not an RPG.
Becoming obsolete doesn't negate the fact there is actual progression in the system, where as the DT armor system has no real progression in it at all.
Skyrim actually does that, on top of offering a more consistent curve for armor progression then DT does. So...... by your logic its a better game.
Also, medium armor is always a "worse of both worlds" situation, which is why it was removed in TES post-Morrowind.
It's exactly, because of all the bolded things that Lonesome Road was flat and dull.
What you just described is all the worst of MMO style game design, where crabs in a level 60 zone have 100 times more HP then crabs in a level 1 zone simply because "level 60", despite the fact a crab is a god damned crab either way, and should have the same amount of health no matter where you are.
Lonesome Road, and all the DLC for Fo3 and NV for that matter, svcked because their enemies were so terribly level scaled, and offered no logical explanation for them being better, that it just became a sore thumb of "obvious artificial difficulty".
One of the best things about Skyrim's DLC is that the newly added enemies were just a little bit stronger then the ones in the base game, following the next logical stop in the scaling system, rather then jump like 4 steps ahead like Fo3 and NV did. It made the enemies fit smoothly into the gameplay, where they felt like just another rank of enemy that should be i nthe game world, rather then the obviously jarring artificial difficulty monsters from Fo3 and Nv's DLC.
And no, almost all games do not do so, its mostly only RPgs that do that, and they have been slammed for t for ages.