You know, I think
this is the biggest problem the Oblivion and Skyrim have compared to Morrowind.
http://uesp.net/wiki/Skyrim:General_Tulliusvs
http://uesp.net/wiki/Morrowind:Caius_CosadesOr better yet
http://uesp.net/wiki/Morrowind:Dagoth_Ur_(god)
vs
http://uesp.net/wiki/Skyrim:AlduinCan you see the issue here? It's the freaking levels!
There's no sense of progression in Skyrim's world (or at least it pales to Morrowinds) because f*cking EVERYTHING scales to the PC's level. The 'great warriors of Jorrvaskr, inner circle of the companions' were, except for riiiight at the beginning, always essentially equal to the PC in level if not far weaker due to equipment. Yes, one can imagine why people who can be followers would scale, but instead of that it would be far better if you just couldn't access them as followers until your power reached a certain level.
Think of it another way: In Morrowind, when you met Vivec you were in awe of his power because A) lore and B) if you tried attacking him he would
wipe the floor with you unless you were insanely late-game. In Skyrim, you meet someone who's, while not on the level of Vivec, revered and powerful but they're just, maybe
just a few levels higher than you. And they're
always just a feeew levels higher than you. Said Companions, for instance (and the handling on the way Guilds work is another can of worms, but that's quite subjective.) I could go and slaughter all of the Stormcloaks right now, but... Lolnope essential.
The Ordinators are a particularly good example. They start off as waaaaaay more powerful than you, but you grow stronger. You watch their power begin to pale in comparison to yours. Eventually you just taunt them and kill them for the lulz because they pose no threat to you. You feel like you've gone somewhere, you started off as a nobody and you have become
awesome. Hell, look at the difference in how quickly your character gets their in-story 'awesome' status. In Morrowind it takes until about halfway through the main story until you're named Neravarine and you feel like you've succeeded at something, whereas in Oblivion and Skyrim pretty much right at the start everyone is like 'Whoaah Hero of Kvatch, Dragonborn, you rock!' Before you've really even done anything. It feels fake. People start to like you and think you kick ass way too quickly (An example of this specifically: I joined the thieves guild, having done one little pickpocket job and a bit of money collecting, and everyone's like 'You know, you're really awesome. You're starting to impress me. etc.' and I've barely done a thing. I could easily become the Hero or Dragonborn by level 2, but in Morrowind, becoming the Neravarine would probably have to wait until, maybe, 15?
Anyway, moral of the story:
Leveled items and NPCS suck ass.
In Morrowind you actually felt like you were going somewhere.