Splitting this into two posts, because tl;dr:
Finally, and most ambitiously, Bethesda really needs to put a lot more work into this "Radiant Story" system.
Consider, if you will, if instead of having a large number of characters that are there for a specific quest, you simply have a pool of procedurally generated NPCs who were something like migrant laborers. They could travel from towns that were undergoing hardship and economic or military stress to towns that are expanding. They could dynamically take up jobs in the fields far from the city walls when the hazards outside the city had been pushed back a good distance by player action, becoming farmers or woodsmen or miners. These would, in turn, affect the economy of different towns, and this would, in turn, affect the major quests of the story. Instead of helping Stormcloaks and Imperials purely by direct military conquest, you could help them passively through clearing out the hazards impeding commerce around their main bases of operation, and the game would dynamically react to your efforts with the city becoming richer the safer it becomes. This, in turn, would improve reputation in that area, and alter the balance of the skirmishes that the different factions in the game were waging amongst themselves across the map.
Likewise, procedural NPCs could be killed off without breaking quests if Radiant Story would mean that a new migrant laborer could just take their place. The procedural quest would simply need to tie it in to another random character.
To quote myself from another thread talking about how Radiant Story could be brought in to give more context to the choices we make with our character:
More generally, having a game that reacts procedurally or dynamically to the character (You know, the whole purpose of this much-lauded Radiant Story system?) would make for a far more dynamic and personal gameplay situation. I actually can get a lot of role-playing done in games that have more open environments, like Dwarf Fortress or The Sims or even games like Total War or Civilization. That's simply because the game never tries to interject any narrative that might contradict me, and the game reacts dynamically to my choices.
What's wrong with having the game record the types of quests you take, the ways in which you complete them, and then making the game react to you as a character who is known for those quests and actions? If the character rarely reacts to stories of fantastic treasures in forbidden crypts, but will always hop straight to the rescue of a kidnapped child, and will be willing to give significant amounts of charity to the beggars every time the character sees one, wouldn't recording that the player is not particularly lured by wealth, and catering the game so that the motivations that they give to the player will not involve promises of monetary reward be entirely appropriate? You can even use the same quests and dungeons, just give the player different quest hooks to get them into it. This isn't something that takes tremendous machine power or highly detailed set piece resources to produce, it simply takes the vision and conceptualization to design the game to react to player freedom and choice. This is what they promised with the Radiant Story, but it is not nearly adequate.
Really, most quests are "sit down and listen to the story we are going to tell you" or else you have the option of "don't listen to the story at all". That's basically reducing it to the interactivity of a movie - you either watch the movie, or not. Well, OK, so you do have the "option" to screw up and die, but that's really just brining us down to the interactivity of a Quick Time Event. (Click attack button at dragon to not die!)
To give a more clear example of how the Radiant Story system should have worked, let's say you want to build a quest around a dungeon that is a crypt with a lich in it. We're always going to use this crypt and lich, because making dungeons is hard work, and so, we want to make sure the player always visits this dungeon so that we can make the most of the resources we invest into the game. However, we also want the player to have choice, and those choices to have meaning to the player. How do we do both?
Well, let's see, if the player is a sneak thief, simply have some of the local rogues mention the treasure of the crypt, and let the player find out there's a lich at the bottom who doesn't like having his house raided the hard way. What if the player is a knight-errant type? Lich kidnaps child to perform profane ritual sacrificing child's life, and the hero is asked to rescue the child. Player some sort of religious templar? Send him/her off to end the profane rituals of the lich. Player a necromancer? Leave hints about how there is a lich who knows of secret arts to increase his/her magical power, and let the player clear the dungeon just to try to negotiate with the lich. Maybe even have a peaceful resolution with the lich, or maybe negotiations break down, and they fight, anyway. Maybe the player is involved in some larger intrigue or another, and the player is told that the lich has some secret, and so you have to find a way to get that secret out of the lich... but will the character be willing to work with someone who has nefarious interests and asks the character to do disturbing things in exchange for the supposed greater good of furthering the cause you are along on?
Here, we get to use the same dungeon and lich, and have pretty much the same dungeon crawl as filler, but the meaning behind the character's actions are all wildly different. Again, this is the sort of thing you should be able to do if you just use a design philosophy throughout your game like what that "Radiant Story" was supposed to give us. One location has a half dozen different conflicting quests and meanings, depending on what sort of player is going to be thrown at it.
Beyond that, working less on making a dramatic narrative, and more on making player interactions with random NPCs seem dynamic and immersive, with the NPCs having more "canned pvssyr" and more procedural personality points that dictate how they react to their world and the player would probably improve the game, especially as this lets you further get Radiant Story take over from having a "main story". Making the companions and marriage candidates and even just servants and shopkeepers seem more lifelike when you're just talking with friendly NPCs is probably one of the best ways to improve the sense of immersion in the game.
Finally, it would be a fantastic masterstroke to give the player the ability to actually have a land holding when they start actually winning over land for the faction they are helping to succeed in conquering parts of the map. A player-owned manor could potentially be dynamically expanded if the player pays for additions onto their house, and this could be done in a manner that involves snapping on modular housing pieces, rather than simply having pre-built houses and furniture. We already had mods in Oblivion that let us purchase deployable furniture our characters could rearrange in-game. Modular housing extensions would give players the chance to really become creative with their own homes without needing the modding expertise. Outside that home, meanwhile, you could attract some of the migrant laborers, and have a farm or labor camp whose economic activities you could direct - having them harvest alchemical ingredients for your use, or generating trade goods for sale.