Doesn't even sound fun to be frank..
Agreed. Master difficulty should be, as you say, a quasi-realism mode. Not only does it sound painfully annoying to fight enemies who have 3 times as much health and damage output as you, but it also sounds like it makes no sense. You're the dragonborn, yet average bandits out-damage and out-health you. No thanks.
Saying that, in order for a realism mode to work, there would need to be a reliable means of actively evading damage, which there isn't at the moment. I'm not 100% sure why they took out the "roll" moves from Acrobatics in Oblivion, I think they'd be a great addition to Skyrim - even if it just meant being able to use Whirlwind Sprint (on a shorter cooldown) in all four directions.