Hi, the forums resident crazy tech dude here
Plausible? Yes
Today? No
Procedurally [randomly] generated stuff is getting more and more attention as a way for game developers/Hollywood effect wizards to do more stuff without hiring more people/spending more money. So it's definitely being developed. That dream city [Limbo] in Inception was mostly "procedurally" generated. There have been tech demos, "hey look what we did!" types of things in recent years, and only somewhat useful tools just starting to be available.
So, is it possible, even plausible that say the Elderscrolls 6 could in some way use stuff like this? Certainly, in fact Oblivion and Fallout 3 used some of these tools to help build there massive terrains. But we aren't likely to see something that can produce stuff that's actually interesting to play and can be generated "on the fly" for a few years yet.
You're thinking waaaaaay too far.
Random generated content as proposed could be something simple, with dungeons created ala Diablo (or Hellgate, more relevantly), using already existing tilesets to throw something together. Quest can function in the same way, like they already did in Daggerfall. You have the basic quest types, you just have to fill in the blanks. With a couple of types and a few dozen basic variations this can last you a looooong time if thrown in with the handcrafted stuff, especially after having finished the main guild questlines. Just you at a certain rank being able to do jobs without being pressured into a promotion (steal this, protect that), or getting high profile jobs after making it all the way to the top.
In the same way, development time could be cut down by quite a lot by mixing in random elements in between handcrafted ones. Rather than have almost every dungeon and every square inch of the map have a purpose for a quest or two, have a few areas that are there purely to look pretty, to prolong travel times (and thus gameplay), and a few random dungeons in between the handcrafted ones for random bandit hideouts, monster dens and all. This also enables the artists to do a single epic dungeon where they would otherwise be stuck on having to do 5 or 10 smaller dungeons - Same with quests and landscapes. Since the landscape at least is fixed, that can be touched up after it's generated. It's of course a little of a gamble that you won't get really stupid dungeons and quests, but with some proper QA you can make sure the algorithms work properly.