What do you think Immersion is? What makes it happen? You say you felt immersed in Morrowind and Oblivion, Why?
I felt immersed in Morrowind and Oblivion for different reasons.
I think a big part of it in Morrowind was the music. The main theme playing just inspired a desire to explore. But for both of them, being greeted by NPCs were a big part of it. Walking up to someone and being acknowledged really made me feel like I was recognized in the game-world, even more so when they would identify me by my actions (such as being referred to as the Hero of Kvatch or the Champion of Cyrodiil.) In Morrowind, the lack of identification in that way (NOT being called the Nerevarine) worked
for the story, since very few were supposed to know that I was seeking to fulfill the Nerevarine prophecies.
Oblivion also had a lot going on even when I wasn't interacting with anything, and that played a big role in immersion for me as well. People were always walking around shopping or talking or visiting their family and things like that. I wasn't the center of attention; people were living their lives with or without me.
Morrowind had the bonus of being so different and unique compared to the real world. It helped a lot of players, myself included, get involved in the world.
Again, for both of them: literature. A ton of books and letters and all kinds of things detailing both the history of the world and just personal things. I always liked finding a letter on someone's desk detailing some mundane event that had no significance to any quest or history, it was just something that didn't concern you at all but was important to in-game NPCs.
I could go on and on, but I think the point is, it's the little things that really make MW and OB feel like a real alternate universe and a living, breathing world.