I agree 100% with all this. I appreciate elements of MW and Oblivion, but I think it's pretty clear that the most dramatic change in the series was from Daggerfall to Morrowind. The stated design goal of Daggerfall was to create a role-playing environment where the player was the main character in a play that would change based on the player's actions. For MW the goal became "exploration." I don't mean this as an insult to either game, but I really do see MW and OB as part 1 and part 2 of the same thing. Daggerfall was something else entirely.
Actually, I suppose that all the games of TES series are quite different and still they are TES games. I love all of them, from Arena to Oblivion, each one fore different reasons. Yes, I agree that Daggerfall is a wonderful, amazing, fantatic game! But I will never agree that Morrowind was a step back! Yes, it lacks climbing the walls, banks, carts. Yes, the judicial system is rather stupid and the clothing system lacks Daggerfall's wonderful hooded capes which you can wear over the cuirass which can be worn over the shirt. It lacks mysterious withches, turning from the old hags into beautiful girls. It lacks powerful Daedra summoners and magic items smiths. But it brought something so important, that all these gaps could be easily forgiven. It brought the ability to surprise. In Daggerfall I knew that my day will be devoted to the exploring the endless maze of the unknown dungeon, then to the long search of the exit, then getting the faceless, impersonal town by fast-travel, taking a new generic quest and starting everything from the very beginning. In Morrowind, while walking from one unique town with its history and personality to another (not less unique!) I could found something unexpected, amazing, something what can interrupt my way and make me go in completely different direction, doing completely unexpected things...
There is also one more reason why I like Morrowind not less then Daggerfall. It is the feeling of cosiness. It is the world where you really live, where you are not the stranger. In Daggerfall I knew no one except the heads of royal families. Everyone other were nothing to me but the sources of services and quests. In Morrowind I knew a great number of people, not only names, but their characters, their interpersonal relations. I knew that Galbedir don't like Ajira, that one girl is in love with a mugger, that one lady hates men, while one sir likes both men and women, that some are ready to get in troubles for their ideas.
I knew that all of them were real people and not cardboard characters as in Daggerfall. And that's why I can't help arguing with those, who state that Morrowind is a "regress' or it doesn't fit TES series. Actually, it brought the life into series!