I have spent around 3 hours making this my character, and it was feeling more like 5 minutes... Result of my 3 hours' efforts is shown on screenshot.

I think the only other game which has as elaborated character creation system is Battlespire. I just wish these games had higher level caps for power gamers like me :))

Yeah, I absolutely love how in depth it is.

I think you should speak of a skill cap rather than of a level cap. There is a de-facto level cap, yes, but it's derived from the skill cap. One implication of this is that high initial stats reduce your maximal level. Conversely, lower initial stats increase the maximal level.
I'm not sure what a "power gamer" is and what his / her game objectives are - I would describe myself as a rather casual gamer. I have not yet reached the maximal level in Daggerfall, but I have seen that a high level in Morrowind means invincibility (more or less). For me, this meant the game became somewhat boring - or rather that I switched to a new character or played an add-on.

Be this as it may. I guess you know how level advancement works? Add up your primary skills, your two highest major and your highest minor skill. As soon as you grow this number by 15, your level goes up by 1.
So you could try this approach for potentially obtaining higher levels: Decide about your preferred skills and make them minor skills. Make your least desired skills primary and make sure they have the lowest possible value.
Of course, this approach doesn't take away the skill cap, and you have to grow your undesired skills, if you want to obtain a new level. Depends what you want to achieve.

PS: Have you considered becoming a vampire or a werewolf? This adds more points to certain skills (but doesn't take away the skill cap). Or choose certain disadvatantages at character creation, like "takes damage from sunlight" or "... from holy places". This is a way to increase the potential for hit point increases (at a cost ...).

Of course, it is possible to break Daggerfall once you gain access to the Item Maker and enough money. Just create enough skill boosting items to raise a spellcasting skill to 110 or so, and you can now cast arbitrarily powerful spells for only 5 spell points. This can get you shields that absorb 60 damage per level (and last 60 rounds per level) or spells that have a 100% chance of instantly killing all nearby targets. (Healing you fully every round doesn't even need this trick because the regeneration seed is poorly balanced.)

Out of curiosity (I never got around to testing this), do Shield spells protect against the damage a vampire takes in sunlight?

To my knowledge, you can use "Shield" or "Regenerate" to avoid or reduce damage from sunlight or holy places.
Try it yourself, if you want: Create a character with these disadvantages, get "Shield" and see what happens.

Skill caps imply level caps, which is 30 for this game (someone was able to get Lv.31, not sure how he got under 146 Skill points sum). From what I saw, you don't have to gimp your preferred skills in Daggerfall, just need to average skills of same group during creation and answer 12 questions in a way, which won't increase Primary/Major/Minor skills. Primary skills end at 31 on average, Major at 21, and Minor at 16. Which gives a sum of 151. I took "Acute Hearing" and "Regenerate Health in General" advantages with no disadvantages. I looked at disadvantages and chose none for the convenience of gameplay. With 30 HP per Level, I ended at maximum Dagger Difficulty, but I don't mind that leveling will take some time.

Edit: I took Acute Hearing, because there was no more "Dagger Difficulty" area available for any more serious advantages.

Ah - I never answer the questions and have no idea what impact answering differently has. I go straight to the character creation screens and allocate the free points as I like (or reroll if the stats are too bad - although it can also be fun to play and grow an initially weak character).
My point about primary / major / minor skills was intended to show a way to raise the indirect level cap (but of course not the skill cap of 100). If your preferred skills are all minor, only the highest of them counts for level-ups. Once they are all at 100, you can gain more levels by raising the other skills (it may not be fun for you to do it though).

I believe the questions he's talking about in this case are the ones to generate your character's background, which can alter your starting skills levels a bit, as well as help determine your starting equipment.

Oh does it work like this? I will google some more info about that. Looking at my character skills, I think I can play just fine with raising only 2 Major and 1 Minor skills until they reach 100, I can live without stuff like Lockpicking, Stealth, Mercantile and such :)

But what's the point of doing that then? It isn't Morrowind, where you have to carefully plan which skill to raise for most efficient leveling.

And as melee combatant, putting main combat skills as minor might make your character barely playable (we speak about loss of approx. 15% hit chance and stuff like that). Having all combat skills as minor will mean that they will all be raising at nearly same time, which means much slower leveling, which means having to deal with extremely low hit chance for quite a time and having to heavily invest in gameplay you might not enjoy (playing as caster, diplomat, whatever, when you just want hack and slash dungeon exploring).

The point was in getting maximum possible level, not just getting level ups in different ways, as it might make game extremely boring. If I chose melee fighter (caster, diplomat, whomever) I don't want to spend 90% of time dealing with entirely different types of gameplay as a result of choosing all desired skills as minor.

Depends what you want to achieve :-). The approach I described helps getting the level as high as possible while at the same time getting your preferred skills to 100. I mentioned earlier that to follow it may not be very enjoyable as it involves raising skills you are not really interested in.

Morrowind is somewhat similar in this respect (except that it's more complicated because of the connecton between skills and attribute multipliers; moreover you can lower stats): You level up through raising major and minor skills, but not through raising miscellaneous skills. Thus having your preferred skills as miscellaneous skills gets you more level-up's (again if you are prepared to invest in non-preferred skills).

I myself wouldn't want to play according to this approach, I guess, because levelling up is per se not a goal of the game for me. But I understand the intellectual challenge to optimize certain aspects of a game, for example levels or high scores.

Naa, you just need to avoid selecting same specialization as chosen Major/Minor skills, and should be careful with choosing race, so it won't overlap with your chosen skills. Then you need to select skills in a way, that each attribute was represented by Major/Minor skill, and at least by 2 Miscellaneous skills each (except Luck of course). Selecting desired skills as Miscellaneous will achieve nothing but assure a very frustrating gameplay.

From melee perspective we speak about approx. 5-10% and less chance to hit if we select main skills as miscellaneous. I think no need to say that such character is almost unplayable as melee. Even Kwama Foragers will be unkillable without spellcasting support (been there, done that haha).

Like I said, I have no intention to find out what the highest possible level is, and you are probably right that the approach I have described leads to a game which is not much fun and possibly unwinnable - I myself wouldn't do it, nor do I have any experience in that direction.

It's worth noting:

In Daggerfall, you can boost your skills with the Item Maker. Getting 110+ with a magic skill makes all spells cost only 5, allowing you to get spells such as super shields and fortifying all your stats to 100. (Also, regeneration is overpowered even at more normal spell levels)

In Morrowind, from what I've read, you can create spells that fortify the same stat (or skill, if you have the expansions) multiple times. Getting 800 Alchemy, even if for only a second, can allow you to make powerful stat boosting potions. With 800+ Alchemy and Intelligence boosting potions that were created with such an Alchemy skill, you can create even more powerful potions. (You can do this at more normal Alchemy scores, but it will take longer.)

Arena also has some exploits you can do with the Spellmaker, especially if you are willing to exploit integer overflow (just don't let it overflow twice or the game will crash). That reminds me, I should try the gog.com version to see if any of the reproducible bugs I've found have been fixed.