That knockback doesn't work against players, but when you morph it so that it knocks *you* back, that does work. If others have had a different experience, I'd like to know, but I ran about six hours spmming it and only it every chance I got and it never knocked a player back once. Once it does knock *you* back, I've still never seen the stun work against a player. You can't knock yourself back repeatedly and rely upon that for range unless you have a godly stamina pool, and even then it would take so long that if they can heal at all then you'd get nowhere. NPC guards, I can stun repeatedly and shoot to wake them until they die. Players? Not even once; not with five days /played on my character.
The rest of your post is right. When it comes to melee v ranged, they're balanced. At distance, ranged is stronger. Up close, melee is. Exactly how it should be. I wonder if some of the melee complaints are hangover from other games (like GW2), since this is one of the things that ESO actually gets right. Also, everybody seems to think their build is gimped at first just because they don't jump into PvP and start winning right away.
edit: I should add that poison shot does stun, but only if they start to cast within a second or so of using it and even then, only 1/3 of the time (roughly).