Well, you didn't had a daedric invasion back in Morrowind, did you? That easily explains the huge amount of daedric items in tamriel. EDIT: Still, I don't support such an agressive enviroment-leveling system, a nice solution to this would be to set, either after a set number of days or level of the PC, invasions of new fiends, like a new band of really though marauders, dangerous creatures inmigrating from distant lands and things of the like. Of course people should start talking about this events too, it would add a lot to the inmersion.