I've picked up on hints of them using the "Desert like" Khajiit home town as the next setting. I do agree that your logic here is a little off.. Just because the features are much better doesn't mean we can't (or haven't already) thought of ways to improve the game. You are confusing the setting with the features.
If the next Elder Scrolls has anything to do with the Aldmeri Dominion,it will be set in either Elsweyr, Valenwood or Alinor. They're all Thalmor territory.
Perhaps even Elsweyr + Valenwood combined, since they are side to side, and even then not as big as Cyrodill. It would be so freakin' awesome.
If anything, the Elsweyr mod for Oblivion had me really craving for an actual gamesas title in that setting.