I would say this is certainly one aspect where I felt Oblivion was lacking compared to Morrowind, and I hope Bethesda will aim to improve on this in Skyrim. While Bethesda certainly created beautiful landscapes in Oblivion, the game never succeeded in capturing the same sense of exploring a unique world that Morrowind had. Though Shivering Isles did this better than the original game, but since it was only one expansion that was much smaller than the main game, it was not enough to make up for what Oblivion lacked in this regard. But a new game means a new oportunity to fix the flaws of past games, and maybe do an even better job in what had been done well before. Although I doubt Skyrim has as room to be as exotic as Morrowind did simply due to the nature of the setting, still, that doesn't mean it can't make for an interesting setting, if Bethesda does a good enough job. I hope for a world that will make me want to explore more of it, see more, and learn more. And one that will really surprise me.
Admitably, a large part of the problem with this in Oblivion is that the environments in the game feel a lot more familiar than Morrowind. In Morrowind, I always felt like I had already seen everything before, even when I found something I'd never encountered in the game before, because I did, just in another game, or maybe in a book or movie. Part of what made Morrowind unique was that it was different from other fantasy settings, and because of that, I really felt like I was exploring a different world, too many fantasy settings go with the same formulatic Tolkien-esque Psuedo-Medieval fantasy setting you see in things like Dungeons and Dragons and Lord of the Rings (To be fair, it's not really fair to blame Tolkien for this, considering that most of these settings are either ripping off his works, or ripping off the works of others who are ripping off his works.) the only variety between settings mostly comes in names and the exact positioning of stereotypical cultures on the map, as well as whether the present a romantic view of the Middle Ages as "Ye Good Olde Days" or a darker few full of corrupt nobles who take great pleasure in being evil just for the hell of it and illiterate peasants covered in animal droppings, Oblivion was just another game that suffered from this, leaning towards the more romantic side for the most part, I'd say. This isn't to say these works can't still be good, I can still enjoy a game without a unique setting if the gameplay is good. And a novel doesn't necessarily need to have a creative setting to be worth reading, provided it has a good story and characters I actually want to read about. But it does often diminish the wonder the work can inspire somewhat. Still, even if they kept the same generic fantasy feeling with Oblivion, I'd say they still could have done better in this regard, as mods like Unique Landscapes and Better Cities go to show. Playing through Oblivion now with mods like these installed, I often find myself getting sidetracked from quests when I happen upon locations altered by them. The thing about mods like this is that they add something I always felt Oblivion lacked. Places that really stood out from others. In Oblivion, too often, one place felt pretty much the same as the next. Even though the game had a number of different regions, many of which used different models and textures, the only areas that really felt different from the rest were probably the mountains towards the north and northeastern borders, mainly because these areas had snow, and to a lesser extent, Blackwood, because of its swamps. But notably, both these areas had considerably different geography and climate from the surrounding parts of Cyrodiil. For everything else, it just felt like we had forest, and forest with different looking trees, or different grass textures, or less trees. I simply did not get that feeling that I'm entering a completely different environment I could get in Morrowind when climbing over a mountain and finding myself going from the Bitter Coast to the Ashlands. Now while mods like Unique Landscapes might not completely remodel the different regions. They do bring in some unique locations that are crafted to feel dramatically different from everything else in the area. Now, we might not see too many giant mushrooms or volcanic wastes in Skyrim. But things like what the Unique Landscapes mods do, I think, are not unreasonable to ask for. In the end, it isn't enough for the environments in a game just to look good. To really impress, they need to be able to keep surprising me.
Although it's not only outdoor areas of the game that I hope to see improved upon. Because some of criticized exploring in Oblivion for feeling less rewarding than Morrowind once you go underground too, and to some extent, I agree. When you look at their design, Morrowind's dungeons don't seem all that impressive. Most of them are pretty small and while there are certainly pretty unique ones (The instances where you're exploring a cave and suddenly find the ruins of Daedric archetecture, for example.) a lot of them don't look so different from the rest. So why do some maintain that Morrowind's dungeons are better than Oblivion's? Well, I think there are two issues that contribute to this, honestly. First, there's level scaling. It is a myth that Morrowind does not use level scaling, it does. But he difference here is that Morrowind has less reliance on it than Oblivion. In Morrowind, unlike Oblivion, many dungeons had hand-placed loot in them, and non-leveled enemies. This added a greater sense of danger to exploring in Morrowind, at least at lower levels. You had to be careful when entering a dungeon as there was no guarentee that the enemies you'd face there were ones you could handle. Daedric ruins in particular were quite dangerous as even though the Daedra in them were usually leveled, the mortal cultists were not, not to mention there were the Dremora lords that tended to appear when you took the offerings in front of the statue. In Oblivion, before I started using leveled list overhalls, I never got that feeling. Sometimes at high levels, if your character focused too much on non-combat skills or didn't level the right attributes enough, the game could become extremely difficult because enemies would "out level" you, but at low levels, you could go to most places safely. With this sense of danger also came a greater sense of reward, as if you somehow managed to kill these high level, non-leveled enemies at a low level, you'd still find a fitting reward for it, and a lot of dungeons had rare or unique items in them that you might not have found if you did not go into them. Also, high-level armor and weapons like glass and Daedric were much harder to find in Oblivion, where you could potentially find them on any enemy if you were at the right level. As a result, though you'd be finding this sort of item less often, finding a full suit of say... ebony armor felt more rewarding than finding ten full suits in Oblivion. Of course, not every dungeon had really impressive loot in it, but the simple fact that a dungeon you had never explored before MIGHT have something really great in it made it feel worthwhile. At the same time, the danger of exploring dungeons at low levels also made you feel like you really had to be careful where you went and what you did.
Now as to the other thing I mentioned, I'd say it's a matter of design, specifically, it's that Morrowind seemed t do a better job at reflecting the function of a dungeon in its design. Oblivion suffers greatly from the problem that plagues so many RPGs I've played, which is that the dungeons don't feel like they were designed to be tombs, or cities, or temples, or whatever they were supposed to be. They feel like they were designed to be places for players to loot and kill enemies, which is of course what they are, what with this being a game and all. But if a game is to capture this "immersion" people like to talk about so much, it needs to make you believe that the world it creates could actually function. Houses should feel like a place someone could live in, cities should feel like, well, cities, and yes, ruins should feel like whatever they were supposed to be before they became ruins. But in Oblivion, for the most part, the dungeons feel like they were designed to be ruins from the start. Only the caves and mines really feel believable, and that's because caves aren't designed to serve a particular purpose, they form naturally so there doesn't need to be any human logic to their structure, and for mines, it's because they're similar to caves, except for the presence of ore veins, which is plausible enough for mines, indeed, it's what they were like in Morrowind too, except some of them produced eggs rather than ore. The one thing that doesn't make sense about mines is that every single one of them is abandoned and filled with monsters. Now, I can buy some of them being like this, of course, whether because they were running dry or because the monsters drove the miners away or killed them all or something, but they don't have to all be like that. It's okay for some mines to still be functional, at least, that might provide the illusion that Cyrodiil has a believable economy. But back to the ruins, a good example of the problem with them is fort ruins. These, as their name would imply, are supposed to be old, ruined forts, so why aren't they built like forts? Why is it that instead of places like the barracks and other such things you'd expect to see in a fort? Why do they instead have twisting, underground passages like some sort of labyrinth from a fantasy RPG? For that matter, why are there holes in the wall that shoot darts at anyone who passes by? What logical function would that serve in a fort, a place built for soldiers to be stationed there to guard some location of importance, like a road or city? And why are none of the forts operational? Is it because all the soldiers stationed there got killed by their own traps? Now in Morrowind, on the other hand, the dungeons often, not always, but often, felt more functional. Ancestral tombs were pretty obvious. They're tombs, dead people are buried there, while you don't see any coffins, one would presume that this is because Dunmer cremate their dead, and those urns with bonemeal you see are actually used to hole the ashes of dead people. The loot in them is mostly the possessions of the people buried in the tombs which were buried with them. Even the undead in most of the tombs are justified within the setting because it is noted that Dunmer have a tradition of having the spirits of their dead guard their tombs. Then we have Dwemer ruins, I think in this case, a lot of it comes from the presence of furniture, beds, tables, chairs, and such. And clutter items that aren't actually of any use to the player, beyond selling or looting. Things like Dwemer bowls and goblets, or coins. These things helped to provide the illusion that people once lived in these places. Compare to Oblivion's Ayleid ruins, sure, they looked nice, but what purpose did they serve? Were they cities? Tombs? Why are all those traps in there? Maybe the real reason the Ayleids were overthrown is because they kept getting killed by those swinging blades and poison gas vents and what not. Now, if it weren't for the overuse of level scaling, I might say that Oblivion's dungeons are better at being places for players to loot and fight enemies than Morrowind's, if nothing else, they're on average bigger, but at feeling like places that once served a real purpose, before they were abandoned, I'd say they're a step back compared to Morrowind.
Now, I suspect that Bethesda has already seen that they made a mistake with Oblivion's level scaling, considering that thy seem to have improved on the problems it caused to an extent in Fallout 3. I'd also argue that the dungeons in Fallout 3 felt more functional than the ones in Oblivion. So I do hope that this means we can expect good things from Skyrim as well in this regard.
And that was kind of longer than I expected it to be, but I can't help it. When i get to this subject, I just feel that trhere are many things I must say.
The Shivering Isles expansion for Oblivion confirmed to me that Bethesda were acutely aware of what was "missing" from Oblivion, and easily able to recreate that essential sense of magic. I have high hopes for Skyrim.
One might argue that Shivering Isles was Bethesda attempting to adress the complaints that Oblivion felt too generic, and considering what an expansion could do, I'd say it did a pretty good job. I just hope Bethesda can pull it off on a standalone game scale with Skyrim as well, we shall see.