My team is the Braves with fictional players and I am in about my 15th season. I am not sure if their park favors pitching or hitting.
I would guess your pitching problems are likely caused by one or more of these factors.
1) Check to make sure these "dominating" pitchers are dominant against both LHB and RHB. A few RBIs from the batters the pitcher is weak against can kill any ERA.
2) Make sure the "truly dominating" pitcher doesn't have problems with consistency. If they are lights out for three starts and then get shelled every fourth start their ERA will of course rise.
3) Make sure you are taking them out of the game as soon as they get tired. If they pitch six great innings, but get tired and blasted in the seventh inning it will hurt their ERA even if they still win the game.
4) Check to make sure they have a good selection of pitches. The AI hitters are smart and if your guy only throws a fastball and slider the good hitters will blast him even if he is so "dominating" his fast ball is 110 mph. Well not that fast, but you get the idea.
5) Check the pitcher's control. Walks lead to runs that will hurt his ERA.
6) Finally, the better your defense is the easier any pitcher's job will be.
The "roadmap" I use and outlined above will enable you to keep the absolute best of the best on your team. You can weed out the ones who have some of these minor to mediocre flaws and trade them to the AI where you get a future batting champ and they get this "dominating" pitcher and his 5.00 ERA.
Hope this helps you guys out!