Nopper. We already seen "Large Scale Battles" in Oblivion with the Dremora seen as "Evil" because of this kind of setup.
Dremora aren't seen as evil because the battles in Oblivion were too large. They're seen as evil because they pretty much always appear as enemies. Even the few cases where they do say anything to you, it's generally just to taunt you before attacking you. Morrowind wasn't so different, though. I mean, someone who threatens to [censored] your corpse doesn't exactly come off as very heroic.
Back to the subject of large scale battles, though, performance wouldn't be a problem, if Bethesda was planning for large scale battles from the start, they could program the engine to handle the large groups of characters that would be needed. The problem is not with that, but rather, with the gameplay experience the series offers. The Elder Scrolls is about
you. Sure, maybe you work for someone, and in Oblivion, while Martin was the one who actually stopped Mehrunes Dagon, it was the Champion of Cyrodiil who did all the work that made this possible, you are the hero in all the games, not just a single soldier in a larger conflict. And no, this should NOT change. I play the Elder Scrolls because I
want this experience, if I want to be just one of many soldiers in a larger battle, I'd play Call of Duty or something. In the Elder Scrolls series as it is now, large scale battles just don't work well, aside from the engine not being suited to render such large groups of people fighting at once, there's also the fact that the AI really doesn't behave very well in large groups. Soldiers who fightr beside you often do more to hinder you than help you. And they don't employ effective group tactics, in essence, a large battle would just become absolute chaos. And also, as has been noted, large battles would favor warrior type characters, which is not something you want in a game that makes being able to make whatever character you desire a major selling point. Even if Bethesda could overcome these problems, I could see large battles working out in three ways in the series. It could still be all about you, in essence, you get lots of people fighting, but it all doesn't matter, you're still the one who does everything, everyone else? Meaningless, in short, everyone else besides you and your targets are just for decoration. The second option is to make the player the commander of an army, so that while the common soldiers are the ones doing the fighting, you're the one making critical decisions in the battle, but if you're going to do that, you might as well just make it a full fledged strategy game. The command system would probably either be very basic and poorly implemented if it's only a small part of the game or it would become the main focus of the game and make everything else terrible. Then there's the "just one soldier" route, but I already said why that's bad.
Why would the series need large battles anyway? Because it's epic? Having large battles in the game just for the sake of being epic is just silly. It would make sense if the plot actually involved a full scale war, but if Bethesda's going to do that, they should just make a real time strategy spinoff, a war story would work better that way.
As far as battles go, Bethesda probably shouldn't go any larger than something like the Battle for Bruma.
We keep complaining that there's nothing to spend all that money on in the games; what about if YOU are financing one of the armies, or at least a company of the participating troops, in support of one side or the other. You've got to provide them with the equipment, training, leadership, and raw recruits over the course of the game in order for your "faction" to have a chance of winning, both by direct financial contributions and by various "quests". Your own combat on the fringes would also have an effect, but a non-combat character could still "win" by providing "support" during the actual fight, and advantages through intrigue or statesmanship during the preceeding quests, to keep their side viable, whereas a "tank" character would have to do more of the fighting personally. By allowing you to back either faction, and gearing the quests accordingly, you give the player more "replay" value than a simple "us versus them" one-sided story like the MQ in OB.
For a short asnwer, no.
For a longer, more detailed answer. That would not go well with the Elder Scrolls. The Elder Scrolls is not a strategy game, it never has been, and while I'd be fine with it if Bethesda decided to make a real time strategy spin-off of the franchise, the main series should not go that route. In strategy games, gathering and managing resources if generally a very important part of gameplay, without whatever resources the game requires, you cannot build a strong army, and taking this part out often leads to displeased fans. However, the Elder Scrolls is not about that, and never has. Such things would just detract from the appeal the game already has and be annoying. The Nerevarine never needed an army to defeat Dagoth Ur, and the Champion of Cyrodiil was able to do all those chores for Martin and protect him at the final moments of the Oblivion Crisis on his own. Why should the series' heros start depending on others to fight their battles now?