Until Level 40-ish. Then the 4th wall is broken. And maxing anything like the Light Armor/Weapon Perks quickly will break the game, as it will double your damage output or armor value far ahead of where the game thinks you're at.
I mean really. You can make a 4million damage bow without hacking the game. Skyrim plays well if you restrict yourself (although people with no combat focus will suffer a lot.) Long-term it breaks down like every other Bethesda game, where you power up too quickly playing as you feel like you "normally" would, trivialize half of content either because you have too much money or you're too high level, and the "end-game" becomes a quest of maxing out for maxing out's sake. Skyrim delivers better unique loot than Oblivion did, much earlier. So there's that. But it accomplishes that by gimping the fuck out of the variety and utility of magic items the player can create. So there it goes.
It's a Beth game. The best looking, most visually and aurally immersive, expansive game they've made. But it's a Beth game, through and through. I feel much about it how I felt about Oblivion by the time I stopped playing, except that I enjoyed more of Skyrim along the way. In the end Skyrim feels like it gives you even less end game punch than Oblivion, due to the mechanics and game systems, despite dragons and shouts and EPIC MOUNTAIN VISTAAAAAASSSSS. And that disappointed me a lot.
What keeps it playable is the fact you get a lot of choices but only get to make one very infrequently, your perks. It's the lack of metrics that makes Skyrim feel natural because there's none of those things working against level scaling. You're not getting stronger by beating stuff up, so you don't end up horrifically strong just running around. Instead, you're acquiring perks, and the non-combat perks in many ways increase difficulty while combat perks drastically reduce it. And then gear, smithing and enchanting drag difficulty out into the street and shoot it in the face.
In some ways a real leveling and stats system would have worked better than me as a player saying "Ok, I'm level 30. Is it time to put another point into 1-handed damage?" But they didn't even try. Some may like the flexibility. To me it just makes the things you do have to pay attention to, perks and gear, seem less interesting because they can't hold up to that level of scrutiny.
If Bethesda games would actually stop and look at the challenge level of the thing you're fighting before deciding to hand out skill ups, experience, whatever....their games could be balanced so much better to last. But that's not how they roll. They rely on the player level to dictate, well, pretty much everything, but there's never any feed back after that point. A swing with a sword only cares about how much you know about swords already, not about what that sword is cutting into. When the difference is wolves vs. dragon princes, it feels like it should matter. Put another way, if the game actually cared about the content you're encountering in terms of its difficulty, you could do 5 bandit caves in a row without seeing a skill up, then get skill ups when you go to the top of a mountain and fight a dragon. That's how I feel the game should be playing out. Instead, I manage to get 2 levels between 2 bandit caves and feel like I'm on the "Fun clock" where the more I do, the less interesting and meaningful the game gets.
The system could be balanced to support one character seeing most of the world and do it all in one lifespan in a way where 1/2 of it becomes a meaningless slog. I feel like Bethesda purposefully balances things in the OTHER direction, to force people into replayability. They balance it so you can't concievably do everything without getting bored so you're tempted to restart again to preserve the challenge. When all anyone really wants to get the most time out of each character that they can. I'd happily play my first Skyrim character through the whole game, if it could actually stay balanced and challenging.