Most people want it to be black as pitch at night arguing that without the moon on earth, the night is actually really dark. But Nirn has two moons and IIRC Masser is always shown; thus it would always provide some light, never getting to the ‘so dark you can’t see your hand in front of your face’ that it does in the real world.
But the thing that I always noticed about the dark, that I’ve never seen any game do well is that there isn’t actually any color if it’s too dark; you can only see in grayscale.
Just that would make a huge difference, you would still be able to travel at night without a light source, but you don’t get color.
But while inside in dark caves there should be ways of being able to see without giving the dungeon bizarre light-that-comes-from-nowhere like in most of Oblivion.
In the real world, when you go from a well lit room to a poorly lit one, you start off unable to see anything at all, but after a minute your eyes will usually adapt and you can see what’s around you.
So in-game to speed things along you are able to see again without light in maybe 10 seconds, with some races having a faster transition.
Also after exposure to bright lights, you’re almost blind for a few seconds while your eyes change back to dealing with a large amount of light, this could give light spells an actual use, blinding the bandit hiding in the cave.
Now onto the subject of night-eye, while Oblivions use of the false color was interesting, personally I found the blue to be a bit of an eyesore. If the darkness were done in grayscale, then night-eye would be a sharper version of that; possibly removing any effect of other lights (i.e. you do not get blinded by bright lights, or other spell effects).
With racial bonuses to light:
Khajiit should be immune or highly resistant to blinding and the eye-of-night should be some sort of toggle spell that provides night-eye until deactivated.
Dunmer should also be resistant to blinding and have equal or better dark adaptation speed to Khajiit. (i.e. if other races have 10 seconds before they fully adapt, Dunmer should have two)
There should still be torches and other light sources that the player and other NPC’s can hold, but there should still be a way for people to go without.