No its not possible because TES if filled with objects. unlike in Just cause and stuff like that, in just cause enemies and cars are generated around you (you dont see them appear but they appear like some distance from you) in TES things are where they are and they stay there. if you drop a sword you can go at the end of the world and come back and it will be there in those games if you leave a car and walk 40 meters away the car disapear
That's just not true, you think that the sword is lying there all the time? Of course it's not! If you enter a house in Oblivion, does every item in the exterior world gets deleted because it isn't visible anymore? Do you think that when you walk around just outside Leyawiin all the bandits near Bruma and all the items you dropped there are are being visible, or else they get deleted? They are loaded when you come near that area, so the engine only has to remember that it is there in case you come close to it. The same can be done with cities, if you are not near it it won't be loaded so it wouldn't slow it down. Right now it also has to remember the NPC's and the items that are in that city, even if you're in another city.
You can drop thousands of swords all around the wilderness in Oblivion and have many NPC's (bandits, villagers), creatures and a huge amount of trees in the wilderniss of Oblivion (as in, everywhere out door out side a city) and yet you can walk around in it without loading screens or huge lag (unless all these creatures, NPC's and items are all at the same place) so why would including towns in this world become to much?
Maybe in Oblivion it would become to much, but in that case Bethesda just has to start using Umbra and we won't have problem with it. Since Umbra will make sure that only the things that are visible to you (everything on your screen which isn't blocked away from your view by another object, and some more so you can turn your head without it having to load while you watch) you could have a loadingscreen free world with probably a better framerate than with Oblivion (in theory of course, sicne TES V will probably have better graphics, better AI and other stuff that will slow it down, which only makes this way of increasing framerate an even better choice!)