It could've been great. And in fact there are several things that were in the game already, but Bethesda didn't do anything with them.
Ocato and the Palace council chamber: He's sitting there doing his important business (nothing) in a large room with a whole bunch of empty chairs. A lot could've been done with the whole Oblivion crisis thing and the different city rulers (and Ocato) trying to push their own personal political agenda during the main quest.
Gellius Terentius: The son of the Bravil count is a skooma addict. Aside from a rumour and loading screen message, and the fact that you can see him drinking, there's nothing that can be done and people don't seem to care.
Countess Alessia Caro:She hates Khajiit and Argonians. In Leyawiin castle there's even a
Lady Llathasa Indarys: The wife of Count Andel Indarys, who died when she fell of the stairs. According to an in game rumor however she may have been pushed, by the count himself possibly. It is also strongly hinted at that the Count is aware of the presence of the Dark Brotherhood sanctuary.
Why didn't Bethesda expand on any of those things? They started something that had great potential, but then just decided to... stop.
Any thoughts?