For me this is one of the most important aspects I want to see in the game, I want the game world to feel "alive"
Back when I played TES2: Daggerfall and entered a town for the first time, it truly felt "alive" for me. Quite primitive today, ~15 years later, but I want to be awestruck again with how alive TES5 feels.
Vizima in The Witcher was a really well made game city that felt alive I think. Kids playing around and people running for cover when it rains, people playing music in the taverns and so on. Very nice indeed
SO TRUE. I don't think the lifelike quality of a town really has much to do with all this "radiant AI" crap. I think it's more of the little things. stray dogs, people loading and unloading carts, window washers (speaking of which, i'd love to be able to see into windows this time around), folks transporting goods, addressing their acquaintances by name, having a larger and more logical progression for their conversations (no more saying hello, talking about mudcrabs, and then departing!!), drunkards wobbling home after happy hour, running for shelter in the rain.
I don't think all this is terribly hard to implement and it doesn't have to be universal. Perhaps the loading and transporting of goods is scripted, that's realistic given delivery schedules and such. Rain triggers people to go inside the same way night time does and if they are out they simply run while covering their head. Having more believable conversations probably would require more voice acting, but even if there are a select few "friends" in each town who address each other by name, it would go a long way. Also having conversation topics that refer to events that the player will never have knowledge of. "Well I have to get going, but we'll meet Loredas for drinks to discuss it further." and stuff like that!
Oblivion was a huge step up from Morrowind with respect to the liveliness of towns. the day/night and weekly schedules of NPCs were great, and i think they should be taken farther, but you would need a better way to quickly tell what time and day it is while you were playing (pocket watches perhaps?). If the jump from Morrowind to Oblivion is any indicator, I'm guessing that i will be pleasantly surprised with Skyrim.