And as said save for the money aspect you CAN visit any major settlement in Morrowind with fast travel services.
The problem with fast travel was NOT fast travel itself but that they made it absolutely necessary to use it by spreading missions all over the map. "No we don't have missions for you here, go ALL THE WAY ACROSS THE MAP for new ones", and "I need you to bring me some ingredients, head to the other end of the game world". No mission was in the close area.
This is another advantage for having a big world, you don't NEED to spread missions out all over the world, you can have them more "local" and still in a good radius. Hell you could have a whole set of missions set within ONE CITY if it's big enough.
What also makes things feel bigger is sectioning too. I think the gradients for switching from "Woodland" to "Swamp" in Cyrodiil were a bit too smoothed out. The land wasn't big enough to have 400 Cedar Trees, 300 Birch Trees, and 4 Cypress Trees in one area, and to go up 4 Cypress Trees and down 10 Cedar/Birch trees every cell. Sectioning can also easily be done by creating obstacles. There were no gorges with caves, no giant rivers to cross, no thick forests of vines and trees, and certainly nothing much at all in the oceans. If you download the "Unique Landscapes" mods, the game world feels a lot bigger because of the time that was put into it.
If Bethesda cut down on adding so many monsters, made the map a whole lot bigger, and added more landscape without adding a ruin/fort/cave/mine/settlement/village every 300 feet, I think it could work out pretty well..
Although, like I've said before, they've probably already decided how big their game world is by now, and already gotten to making it... heck they may even be fine-tuning it.