Why is that space wasted? I have to agree to some extent though, I also missed a couple more towns, especially as I felt there were a lot more in Morrowind. But I just don't see what is wrong with forests, fields, and other landscapes that are just that. I mean if there were towns everywhere it would be kind of ridiculous too. Then you might as well just have a game that was more or less one big city with a lot of roads out of it leading to dungeons.
I'm guessing that most players never even saw more than 50% of Cyrodiil. The forests are beautiful (especially close to Black Marsh, in my opinion), but there's no point in going there. Yeah yeah, "exploration" of course, but while that's a point many people make, they actually don't mean "purposely wandering around and staring at trees", they mean "going somewhere in the world, and finding something that made it worthwhile". There was nothing like that in many parts of Cyrodiil, like the Imperial Reserve, or the whole strip of land on the Eastern side of the Niben.
Villages or farms would have helped, but also more roads, maybe some leading to the guarded borders of Cyrodiil.
I think for Skyrim, they have already corrected this, and laid out everything in a more interesting fashion. For example, there are less dungeons than in Oblivion, and I guess they put them in notable places, not just scattered them all over the place. So that when you walk up a narrow mountain path that isn't marked on your map, you'll be rewarded with a dungeon at the end, which will make this dungeon seem more interesting than the five dungeons you would have walked by in Oblivion, which were somewhere off the road, while the road itself lead nowhere.