LOL, there were just seven or so posts arguing the opposite of this. To each his own, I guess, but I completely disagree...
anyway, things in Oblivion that were improvements over TES III:
- magic system (though the elimination of skills and spell affects was bad, and some more creativity with spell effects would be nice)
- graphics (duh) though the character facial models were horrible.
- animations were better than Morrowind, but still weren't all that great. FO3 looked better though.
- staves that cast magick
- guards patrolling the road.
- the limited RAI that was still present, however it so utterly failed to live up to expectations. Maybe in TES V they can fully realize their vision for RAI.
- The stealth system. However, only being able to sell stolen goods to fences really limited a player's options. If you stole anything you HAD to join the Thieves' Guild to sell it.
- Horses? But fast travel killed the need anyway. Boo fast travel.
- Alchemy
- Skill perks, but these could be improved. And the Magick skill perks were more of a limitation than a perk. Perks like FO3 would be cool but the advantages/disadvantages from Daggerfall would be even better. SO MUCH CUSTOMIZATION!
- Patrick Stewart
Most everything else was either about the same, or worse. In some instances much worse.
Have to disagree with you on some points.
Magic system - I strongly want to disagree. However, I haven't played a mage yet in Oblivion. I don't like the looks of the severely limited enchanting system and the lack of all the various spell effects.
Staves - Morrowind had staves that could cast spells, too. You could also fight with them. Staves in Morrowind were among the fastest types of weapons and I came to like them. Can you do that in Oblivion? Granted the basic steel staff could only take a basic enchant in Morrowind, but those ebony staves were good.
Guards patrolling the road - Have to agree here. That's a nice effect. However, they do odd things. I once saw an imperial patrol hop on his horse and ride his horse right into the lake surrounding the imperial city. I watched with amusemant until he vanished into the distance.
Horses.. Hmm. Horses are nice. But, fast travel does kinda make it a little bland. I'm using a mod that removes every single city landmark from the map for a newly made character, meaning I actually have to travel to those cities first. Encouraged me to raise funds and get a horse.
Radiant AI - I have to agree here that this is a joke. Ultima 5 had NPCs who had schedules and went from home to work, etc. And that was in the 80s. And they didn't ride horses into a lake. Come on now. Bethisda should've taken their time with this to get it right or just avoided it altogether. The so-called Radiant AI in Oblivion is so bad it's comedy.
Stealth system - So far, I agree 100% that the stealth system is better. Simply because in Morrowind you had to hold down the control button to stay in stealth mode. Made my pinky finger hurt after a time. Now, control just toggles it on and off. Much better.
Alchemy - Alchemy is Oblivion is better than Morrowind? You're joking right? In Morrowind, alchemy was the key to uber godliness. A few times, I made some uber strength potions and beat down that a few of Morrowind's god characters while standing naked and fighting with a dagger or my bare fists. Simply because I could. Just to do it. Otherwise, I'd just use it for practical purposes as well as a lot of fun. I'd actually combine bad effects with good ones, calling the potion something like Radioactive Ashland Ale or Corpus Mead. Yes, mead made from corpus meat. Yum! In Oblivion, you can't use an effect until your skill is high enough. That's kinda like punishing a player for having previous game knowledge and replaying the game.. or you're simply punishing a player for exparamenting (ie- playing the game) and finding out neat things about it. Besides, it doesn't make sense. Someone once said that even if you don't know what poison ivy is, it doesn't mean you won't get a rash from it. I forget who said that, but I agree with it.
Animations are better in Oblivion - Hmm. Shopkeepers still stand like statues behind their counters. It would make a huge difference to do something very simple.. like going into a store and finding the occasional shopkeeper lounging back in a chair with his feet kicked up on a stool. Maybe others are passing the time reading a book. I dunno.
Skill perks.. hmm.. hmmmm. I'm undecided as of yet. Skill perks also mean more limitations and restrictions than there were before, too. After all, in Morrowind you didn't need a 50 armorer skill to try and repair a magic item. Some of the perks don't make a lot of sense. Like, a master of Heavy Armor isn't encumbered at all by heavy armor. Haven't gotten this far yet, but does that mean heavy armor suddenly starts to weigh nothing at all?
The advantages/disadvantages system from Daggerfall - Here I really have to agree. You said this allows for customization. Honestly, I think the word here is personalization. In Daggerfall, right from the start, you could make an unholy dude who got hurt from stepping on holy ground, yet regenerated in darkness. Or a darkness mage who's spells were weaker in daylight and stronger in darkness.. or the reverse of that (day mages were a bad idea though heh). The birthsigns weren't a bad idea, but they were a little less personal.
Graphics - Hmm. The NPC faces still look like computer graphics to me, so it's still just computer graphics. That goes both ways, for Morrowind and Oblivion. Not saying it's good. Not saying it's bad. It's just computer graphics. I'm not gonna have a hernia over it.
Patrick Stewart - This guy adds a touch of dignity to anything he works with. Great actor. Wonder if it was expensive for Bethisda. Glad they kept at least some of their previous voice actors, like the guys who do the Nord males and the Redguard males.
All those corny conversations NPCs have, though.. well, am I the only one who finds this strange? Go into some building and see them standing around or going places. Oh! But now that you're here, they just HAVE to run up to each other and start chatting about goofy things. A few conversations have been something like "Oh.. It's you. Hi. I went shopping the other day at (someplace). Bye." That's just weird, man. Very weird. Am I alone here?
All in all, with the strange NPC behavior and the weird conversations it makes for the strangest game world I've traveled around in thus far. I halfway expect to bump into the old host from the Twilight Zone sometimes. People walking into each other while looking at me with big smiles on their faces. Weird, I tell you. Weird.
In Morrowind you'd hear only an occasional NPC comment, making it not so goofy. They were simple, but casual and very realistic like "Hmm, where did I put that?" In fact, sometimes, after playing Morrowind for the 100th time, you'd hear a random comemnt that you hadn't heard before and it'd be like.. heh! I can still remember the first time I heard a High Elf muttering to himself saying... "And there I was.. naked!" It was like.. what the hell? I cracked up. I still chuckle about that on occasion. I think it was that NPC who runs the shop in Seyda Neen.
There's one thing you forgot to mention- background music. Background music in Oblivion is 300% better than the single tune you always hear in Morrowind. I think I've had the background music volume turned all the way down in Morrowind for years now. I mean it wasn't bad, for the first few times. But enough was enough.