I think the auto-difficulty thing is a nod to the console market... and frankly it's stupid.

So you go through all this adventuring and in effect you get WEAKER as you level up... not only is it counter-intuitive but it essentially provides a disincentive for levelling.

makes one wonder if you could just ignore the level up button and go through the whole game at L1... because the game was MUCH easier at L1 than it is at L15.

Drop the difficulty a notch, to 40% or so. This makes an enormous difference in monster hitpoints. No more whacking a guy in the head 30 times with a daedric claymore. Combat is much more pleasant this way.

Ya, the scale on the difficulty slider is huge. But if you're like me, it seems like cheating when you're forced to drop it.

I think the thief class is very powerful; many enemies are incapable of detecting you even while you are attacking them. For example ogres i can sneak attack and the first round seems to paralyze them almost every time. This causes them to be unaware of my existance for the next dozen rounds....which makes it so i am getting the 6x damage bonus for every hit - which leads to kills with zero risk to me. The monsters that are immune to this tactic are still very easily beatable by using paralyzing weapons or spells.
I think alchemy is probably the most overpowered skill in the game - the potions stack with the spells in most cases, and you can make some simply amazing potions - im a master with the 4 expert level alchemical items and i can make potions that regenerate fatigue, health, and cast powerful shield on me at the same time.
So far the only fight i have had real trouble with is against umbra; she was immune to my frontal power attack stun so when i sneak attacked her she immediatly started her attack. I managed to beat her using a staff of paralization so i could attack her without being assaulted back.

I had no difficulty with Umbra whatsoever...but that's because I've reached the top of the game.

See, the enemies ARE leveled...but their equipment can only get so good. In morrowind, only a few select NPCs were priviledged enough to have equipment better than me after level 30...and the same is true so far in Oblivion. Now that I'm level 35, with full daedric, I look at the punk bandits in glass and laugh, because once you hit daedric armor and weapons, the only thing the enemy can throw at you that you haven't already cancelled out is more hit points...and that can be overcome with poisons, potions, and repair hammers.