Oblivion Remastered modder has already fixed its awful levelled loot system, after very reasonably blacking out in an 'incomprehensible fury'

Oblivion is the go-to example of how not to do level scaling. It's impressive how badly they fucked it up. Like, they managed to make exploring pointless and unexciting.

You find a tomb, but you know that whatever's inside will be "level appropriate". If you're low level it'll be steel weapons, and if you're high level it'll be daedric. There's not really any point in going in at low level. Might as well level up some other way and come back when the loot will be good.

On top of that, the gameplay is so bland and unresponsive that you can't really punch above your weight class. The game is very much a levels game. It's not like Dark Souls where someone can get really good and beat the whole thing while naked (and in the game, too). There's a lot of "well, this guard is level 30 and you're 10, so no matter how many times you hit him with your hammer he's not going to flinch." Knowing you're always going to get kind of bland treasure wouldn't be so bad if the act of getting it was fun. Like, sometimes a tomb or whatever in Elden Ring will have crap loot, but it's still a solid core gameplay.

Morrowind had a lot of these problems, but it was also kind of wacky and heartfelt.