And they sure as hell aint using that time to fix the water. Stop deluding yourself. The whole game has low res textures, not just the dragon. The moving water was the only decent water I saw, even if it was low res. All the still water looked worse than Morrowind.
No, because they aren't fixing anything. See, people don't actually understand game development, they think they make an object and the textures right off the bat to be as good as its going to get.
The fact is that for most of their development time, games are full of placeholders. You have to put in placeholders in order for development to continue on other aspects of the game. Its the last phase of development when they polish and replace. Textures, models, animations, effects, even sounds, are all likely to get replaced in the last phase of development.
Also, people need to stop comparing this to Morrowind and Oblivion, where the water was at a set level. It may have "looked" better, but it was less realistic. Water didn't go anywhere, and throughout the entirely landmass, we were forced to have water at the same elevation. Water in Skryim, flows downhill. This means that terrain can be crafted more realistically, with water flowing from the mountains into the sea. This is a HUGE improvement over Oblivion and Skyrim.