Ah, you're right. I could have sworn Ragnaros and that Stone Mother thing (can't remember the name. Is in that lvl 40-ish dungeon.) C'thun is a god though, and apparently weaker than lvl 75 elites. I'm not sure I understand the second part of your statement. If the in game strength of your character isn't considered the strength of your character, that seems like the suspension of disbelief thing again. And also, my Tauren was definitely over 5000. hp.
Ragnaros is one of the Elemental Lords. He is the equivalent of a elemental version of the Dragon Aspects. The "Stone Mother" you are thinking of is Theradras, and she is not called the Stone Mother, as that is her own mother, Therazane, the Elemental Lord of Earth.
C'Thun is not a "God" in the traditional sense, like I mentioned before. He is one of the Old Gods, a former slain one that while powerful, was weak from his original "death". Also, WOTLK has revealed that while the Old Gods are powerful, they are less gods and more an extra-terrestrial parasite. They came after the Titan's first seeded Azeroth, and infested themselves into the core of the planet. When the Titan's returned and killed on of them (the one in Darkshore), they learned that the bond with the planet was now unbreakable, and killing the rest of them would cause Azeroth to be destroyed. Once again, the only real "God" in WarCraft is Elune, who is incorporeal and exists in a plane that no mortal creature can dwell.
As for the last statement, 5000 HP is just a number. The numbers are designed as a way to give one a goal and allow a sort of narrative flow, a sort of character history. You start out as this green guy with a few numbers, barely know what you are doing. You fight local threats, learning, before moving out into the world and fighting darker threats. At no point do we think that I have "powered-up!" like Goku in DBZ and can now defeat Cell without any effort. This is why RPers call levels "seasons", because they represent time and experience more then "raw power". Some games go the extra mile to represent this, like how Oblivion scales every monster in the game to your level, but that is not required to understand that levels are part of the flow of the game's story. In the end a lot of it is perception, but it is not the fault of the game you lose your suspension of belief, you just have a different perception.