The concept is good, it just did not been implemented in an efficient way. If you check the FCOM:convergence mod for oblivion, the creator of the 4 biggest overhaul worked together to make them compatible and they kept the idea. Imposing a minimum and a maximum level for each enemy. It worked very well, the game was still "leveling" with the player but the player would no longer be able to become the arena champion at level one and past level 40 the bandit weren't equiped with daedric equipment.