Map size isn't a console limitation. Just Cause 2 had a http://www.gameblogs4u.com/wp-content/uploads/2010/05/justcause2map.jpg that was dramatically larger than the past games; that squarish island in the top left corner is probably about the size of Oblivion's map, and the game was on PS3 and 360. I haven't played JC2, but watching gameplay videos, it seems to beat the heck out of Oblivion in detail and general attractiveness as well, with larger and outdoor cities. I realize these are completely different engines with completely different things being asked of them, but assuming the next TES is aimed at the next generation of consoles, I don't think hardware limitations will be much excuse for map size limits.
As someone who has played Just Cause 2, the squarish island in the upper left is not as big as Oblivion. Plus so much of the map is meant to navigable by things as fast as
jet airplanes. The NPC's have the same individuality as Grand Theft Auto NPC's, the world itself is not near as detailed, and of course all of those big 'cities' are just blocks of texture. You can't go inside any of the skyscraqers, or do anything besides grapplehook around like Spiderman and shoot up people on the streets or on rooftops. Don't get me wrong, I enjoyed the game it's just not appropriate to draw a comparison between it and Elder Scrolls to show a relativism in regards to world building.
The main point though is, again, it's not an issue of how big the hardware can make the world, it's a matter of how many people and money it takes to give an increasingly larger area the same level of attention and detail as we come to expect in a TES game.