I think back in the day (3 years ago or so?) I used Francesco's mod to effectively fix the level scaling issue.
Contrary to popular opinion, level scaling isn't an inherently bad idea - only if it is taken to the extreme, as it was in Oblivion.
Let me elaborate on that: Many people are unaware that Morrowind, too, had a level scaling feature - it's just that they simply pulled it off much more discreetly. While most of the enemies and items in the game were pre-set, certain randomly-generated stuff (like the soul gems you'd find in random chests and respawning Daedra) would be adjusted to your level - so the standard Dremora you'd find wielding a Dwemer mace at level 5 might be replaced by a Dremora lord wielding a Daedric Claymore at level 20. Yet the average smuggler would still run around in leather and wield a paltry iron weapon.
Oblivion, on the other hand, went completely overboard by pretty much having every creature and their equipment tied to your level, with only little room for variation - at level 20+, every thug would pretty much exclusively wear daedric or ebony armor, completely displacing low-level materials like iron or steel. Back in Morrowind, ebony was reserved for high-ranking nobles, and the only guy wearing a full set of daedric armor was an ancient, ridiculously powerful wizard.
Luckily, you can find plenty of mods that fix the loot tables so that you "unlock" high-quality armor based on your level, yet getting it actually feels rewarding (i.e. common thugs will still be clad in steel at higher levels, but there is now a chance of finding a single piece of ebony armor being worn by their leader, or hidden in a heavily-guarded chest).