Well, this question is split. Elder Scrolls is a fantasy style RPG, so fans of that type of game, like myself, are going to say it is better and go on and on why. Fallout, while it has an RPG feel and draws a similar crowd, is really more of a survival/FPS style. So, the Resident Evil, Modern Warfare crowd will do the same when it comes to blatant fanboy/fangirl bolstering of a title. Bottom line is that they are both great adventuring games that bring thier own personalities to the table, and while I do love me some Fallout, I will always pick Elder Scrolls up before it. And with Skyrim, I think a new standard in RPGs will be set.
Its not really a level up, Dogmeat just gets a level adjustment to meet any opposition you come across. He is still rather vulnerable though. Its a good idea to keep him some where safe until you can take care of enemies yourself for the most part.
It depends with the game. Such as Warhawk, no. There are so many ways to be killed and kill enemies, that it seems that a KDR isn't relevent. But, in a game like (any) Halo, I do. That game requires a bit more involvment than Warhawk.