Back in 2002, what Morrowind provided *WAS* hi-res textures and high detail models. Nine years is a long long time in gaming terms and the original XBox was an even more feeble system than the XBox 360. The game ran fine and had no issue with open cities whatsoever. NPCs may not have had schedules, but they didn't stand stiff as boards in one spot all day either. They moved around.
You're comparing apples and oranges.
Oblivion doesn't place a great deal of actual havok enabled clutter
outdoors so that issue isn't even relevant. Most of that is indoors, and it's already long since confirmed that interiors are separate cells, which I don't think anyone has a problem with. I certainly don't, because trying to make those all into open world cells would still cripple even a high end PC. The AI we got in Oblivion isn't a great deal more sophisticated. Schedules aren't that huge a drain.
Keep in mind too, people are making their judgments based on hugely modified Oblivion installs and NOT comparing the vanilla game anymore. That's a huge error in thinking. Vanilla Oblivion has had zero trouble with open cities on PC, that's easily proven. So it wouldn't have been that big of a deal. It's all the stuff people piled on top of it that cause the problems. I guarantee you that if Oblivion's cities had been open, nobody would have thought twice about it and would be casting blame where it belongs rather than just assuming the cities were even an issue. It's a rant I've made countless times, but nobody seems to want to hear it. Truth hurts. See your own avatar
We'll just have to see how Skyrim handles it. If it's handled the way I think Todd was describing, there won't be much need in doing the work to move the cities out. If they have loading screens though, count on this getting done. You may not see the problem, but there are quite a few people who do and will be thrilled to death to see this sort of gimpery undone.