It's not that they need to hire better writers, there's just limitations. 1000+ characters with custom dialog is probably 10+ gigabytes in sound files which they really can't do, considering the more space it takes up the more it affects sales(somewhat) And making the custom dialog for all these 1000+ characters would take half a year at least, so its just not a good option, i really didn't mind oblivions npcs, i just think they need more random dialog that any npc can have, considering i came across the same rumors countless times, if they had more rumors, then you wouldn't notice it as much.
*Yawn* -- FAIL.
Obsidian has some good writers... but they svck at making games. I really think Bethesda should just cannibalize obsidian for its writers.
Remember the days of games like Planescape Torment... or Baldur's Gate? Where did these people go?
Even Morrowind was better than Oblivion and it's characters were largely one-dimensional too.
I like TES style however, at least you CAN interact with everyone, and it's not just a swarm of background people like an autistic in the playground (hello GTA).
Everything points to the fact that to get depth of story and dialogue in a TES game you have to give up total voice-acting. I don't mind reading my dialogue, I assure you, and prefer it to be chock-full of information.
Yes, the characters in Morrowind were probably more one-dimensional than in Oblivion, but it was less noticeable because they didn't all say the exact same things in the exact same voices. Social interaction revolved around imaginative involvement, and when all you wanted was to quickly get the information like browsing a wikipedia page, you could without having to listen to the same annoying voices coming out of a face pushed up against the screen.