I enjoyed Oblivion a lot more when I started using creature leveling mods. I thought it was a nice balance to have the leveling system somewhere between static and total, where creatures would level between certain ranges. Otherwise, at high levels all highway bandits were millionaire glass armour-wearing demigods that engaged you in epic battles while you went down to the shops to get some milk.

I'll just chip in to say that this is precisely why it's not that much of an RPG. As much as I loved playing DC, one of the first comments of my friend in coop was: "I can take down everything easily with my base gun, what incentive do I have to level up?" I think you can see a world of difference in approach right there.

I didn't have any problem with levels and such in Borderlands. I've stomped through pretty much everything up until I hit the Knoxx DLC without spending skill points or changing my shield of main gun for like 20 levels. Just blindly firing my terrible matador in the general direction of enemies and watching them die without really having to worry about health or ammo. Though a lot of it is probably class/build related.

Anyway I like the scaling in SaGa games, the ecology system keeping track of the different "species" separately, etc.

I don't think there's anything inherently wrong with level-scaling. I don't know if anyone here plays pen-and-paper D&D (or similar games), but it's the same phenomenon--as your character gets tougher, the DM throws appropriately tougher situations at you. It doesn't mean you're being punished for it; mid-level fights where you have access to a better variety of tactics and abilities will take longer than the obligatory first-level rat-fight, but should also be funner.

That being said, any game mechanic can be implemented poorly, and it's obviously much harder to do in a computer game where you don't have hundreds of monsters of varying strength to select from.

But having said that, I would add that I just beat the first Geneforge game. It was nonlinear, and had no level-scaling, and my "reward" for leveling up my character was that certain "early" areas, by the time I got to them, were boring slogs where I was forced to waste my time fighting nuisance mobs who weren't strong enough to challenge me, give me XP, or do anything but annoy me. Some reward.

Totally agree, the most fun I have in RPGs is see how good I can make my party to fight strong monsters and get mad phatz that really improve my characters. Can't do that in games where everything is the same.

I think New Vegas did this best among 3D games, that I remember. Not the pure "tough enemies here, weak enemies there" of games like Gothic and MMOs, but not the "everything scales!" of Oblivion either. I guess Morrowind more or less nailed it as well, though you had to look more for trouble.

Basically have small patches of tough enemies spread around in logical places like a mountain top or cave, but walking the roads and plains can get you anywhere at any level.

Yes, as others have noted you have forgotten the worst offender: Oblivion. That levelling scheme was so stupid. I like it much more if it is done like in Gothic. There are enemies that you just can't compete with initially. Hell, a single wolf is a problem when you are low-level. Then you gather experience, improve your skills and you can dare to enter more dangerous regions until in the end you are eating trolls for breakfast. That's an incentive to explore and gather experience. Oblivion actually punishes you for levelling, as you described. And it really gets ridiculous to have street bandits who wear the equivalent value of several town houses on their body. Why are they still bandits if they are so amazingly rich?

you would hate wiz 8

Yeah, that's an approach I like as well, and it's what Bethseda usually tries to do - applies even to Oblivion, to an extent (roads are safer than the wildeness.) What I hate is when tough enemies are used to lock parts of the world in open-world games - I think that's the most prevelant in Gothic games, which is why I could never enjoy them. It feels illogical, anti-immersive and artificially restricts the player (as opposed to what you describe, which restricts the player in a very organic manner). The last bit is probably what I dislike the most.

I think the OP is looking at this in a wrong way - stronger baddies is not a punishment for leveling up but should be seen as a reward because you have to use better tactics and optimize your skills etc. I understand what the OP is saying in that as you get stronger you should be more able to handle combat but then again if most baddies is a walk in the park to take care of then the game gets boring really fast. Level-scaling is a way to make sure the game aspect is kept engaging even if it doesn't make sense in an immersion kind of way.
Gothic 2 did this in a weird way by making the game absurdly hard in the beginning and then the game got easier and easier and the final boss was a joke to take out. Oblivion got it wrong too with its level for level scaling. Another game that did this poorly was Beyond Divinity who gave you access to random dungeons if you weren't strong enough to do the main quest but that is a piss poor way of doing it.
Morrowind and Baldur's Gate 2 are probably some of the best examples of how to do this right. As you level up more and more baddies gets easier to handle BUT you will still run into enemies that will hand you your ass to you. I don't think most RPG players want easy enemies but we want more diversity when it comes to baddie difficulty and for goodness sake put in a decent save system then.

It always has pros and cons. Bethesda use it in their games, because they want to keep the open world exaclty that - open. So you can visit any area you want and not be annihilated in a second. On the other hand, it gets tiring if you have to put exact same amount of arrows in a goblin after many years of levelling.

Open world in Gothic is not really open, if you get killed instantly after taking the "wrong" turn, even if that's a more "realistic" approach. Not exactly realistic, but you can imagine there are beasts in the game world that would kill you instantly if you're not good enough warrior.

Don't you have books in Romania ?

Like the OP, I found this a bit frustrating with Torchlight too. A good game by all means, but you didn't really get anywhere by levelling up, as the enemies of the same type got more difficult to beat. Makes more sense how they did it in for example Baldur's Gate, where, as you level up, you are able to fight stronger enemies, and stronger enemies are mostly introduced in a natural fashion so you are not faced with impossible fights. It would be ridiculous if you were level 20 and came across a goblin, and could barely beat the bloke.

Yup, area scaling of loot and monsters is the way to go. It encourages exploration to find places with better loot which is guarded by hairier monsters, and it also feels more realistic and immersive that roads and cities are safer than caves, ruins and wilderness.
And in open games like the TES games and Might&Magic games area scaling means that if you get ass kicked in your current area, you could always find an easier area to explore.
Only because roads are patroled by friendly (unless you're a criminal) guards and soldiers, I think. The best thing about Oblivion compared to Morrowind was the much more dynamic and emergent gameworld, where you could stumble upon the corpses of monsters killed by soldiers, or even stumble upon the fight.

I think the "problem" is that too many games allow a character to try to take on too much right from the start. I don't like scaling because to me, a world in which some enemies are just too tough to take on early in the game is more realistic.

I think it's lazy development (to me) to say "Well, you can pretty much do everything in the game right from the start, but as you get tougher, so does everyone else." Ok, maybe the monsters are running around, questing, working on skills, working out... but I doubt it.

I would rather get my butt kicked, then go work on skills and such, and then go back and kick some butt. For me, that's much more satisfying than just going after the same things again and the only difference is it takes longer. Scaling is like the least-common-denominator approach to creating enemies.

Level caps bum me out, because I enjoy leveling and adjusting my character. Like in Guild Wars, level 20 is it, and the only thing you can do after that is trade out skills. To me that's just not as satisfying.