I think you've chosen a bad example. If people can sneak perfectly in full armour, there's something wrong with the relationship between sneaking and armour, not the character advancement system.
I think you misunderstand the example. The problem isn't specifically that they're sneaking in plate (with the aid of a magic spell). The problem is that they're super-awesome at everything.
The complaint is that it is possible to become perfect at everything.
It really is fairly trivial to build up a variety of skills and attributes in Oblivion, and to keep them built-up throughout the game. You wind up with a character that can go into melee combat with pretty much anything, or sneak past just about anything, or snipe just about anything... It really eliminates any kind of gameplay effect from your character's skills.
I like to play a sneaky marksman type character.
In Morrowind, there were some critters that I absolutely hated. They'd charge right into combat and rip me up before I could put enough arrows into them to kill them. Or they'd stay at range and hurl nasty stuff at me. So I'd have to adapt my gameplay to compensate for that... I'd have to make sure I had cover to duck behind, or I'd have to open fire from some location that was hard to reach.
In Oblivion, there's basically nothing I hate. I started out playing that same sneaky marksman type character... But the occasional melee fight quickly got my melee skills up to speed. And there wasn't really anything keeping me from wearing heavy armor. And it was trivially easy to learn some basic protection spells. So I'd sneak up and snipe what I could... And what I couldn't, would just get chopped up with my sword. I didn't need to ensure I had cover. Didn't need to open fire from a good location. Just sneak, snipe, slash, loot.