The stealth archer approach works amazingly well (because enemies have pretty predictable detection patterns), and it gets even better once you've put some time into developing your skills. Starting out might feel a bit rough since your sneak skill needs work, but here's what makes it special - you can actually reset enemy detection pretty quickly, which means you can stack those sweet sneak attack bonuses even on tougher difficulties.

Wood elves are particularly great at this, naturally, since they come with those handy agility and speed bonuses (might be worth grabbing the shadow birthsign too, just adds that extra sneaky edge). Something interesting to keep in mind is that staying in shadows and moving slowly matters way more than your actual sneak skill early on. Once you've got access to either leather or shrouded armor through the brotherhood questline, you'll be set for the long haul.

Sure, you won't be taking many hits head-on because of the lighter armor, but that's not really the point - you're basically playing as a shadow assassin. The headshot system lets you deal some seriously nasty damage when combined with stealth multipliers (try to practice your aim on easier targets first). The trade-off of being a bit squishier is totally worth it when you're one-shotting things from the darkness, especially on higher difficulties where getting into direct combat isn't the best idea anyway.