This is why Oblivion feels small.
The blue area is the land most bother to explore. The red is the least explored in each playthrough.
http://img828.imageshack.us/img828/7327/smallblivion.png
Also, if you ever did venture off the roads, you could still run in a straight line since there were no natural barriers except for some of the most mountainous regions. For example I often ran straight through the forest between Chorrol and Skingrad to save time, or swam across the Pond Rumare when approaching the IC from behind.
Barriers limit your freedom and impart the sense of an "open world", but they have to be there if the world is to be realistic. Venture from the path in any forest in the real world, and you'll get stuck in vegetation, swamps, or find yourself facing a sheer rock face that would be a challenge for an experienced rock climber.