A creature's statblock can change over the long term as it ages and deteriorates, or learns and develops new skills, or whatever; but as most campaigns don't span all that much in-fiction time there isn't usually time for those changes to occur. Therefore, for play purposes stat blocks might as well be locked in.
PCs are bizarre in that they gain abilities and hit points etc. at a ridiculously fast rate in the fiction. Even in our system where advancement is by modern standards very slow, you can easily go from 1st to 10th level in three in-game years; and that's stupid-fast IMO when compared to the rest of the surrounding setting. In the WotC editions where training downtime isn't required a character can go from 1st to 20th in half an in-game year or less.
As such, PCs aren't the best thing to use as benchmarks here.
In-fiction consistency is (or should be!) our master, and the mechanical abstractions should serve that first and foremost.
Which blows up internal setting consistency. Just because a character perceives something to be a certain way doesn't mean that's the way it really is in the fiction (if it did, Illusionists would rule everything!).
To the last bit: it does.
What it also does is flatten the power curve. The PCs get more powerful as they level up but the foes do not correspondingly get mechanically weaker. They just are what they are, and you've still got to do 20 points of damage to this Orc to kill it whether you're 1st level or 20th, and if at 20th level you only roll 1 on your damage die you've got to hit it again (baked-in by-level bonuses notwithstanding, and IMO those get out of hand at higher levels).