I believe one of the biggest problems was that in Oblivion, you couldn't just fly in from the world map and go into the towns or vice-versa. They had to be loaded up before entering or exiting, whereas in Morrowind they were just a part of the whole environment.
Whether or not Levitation or Jump could come back is heavily tied to this mechanic.
Yes, that reminds me: remove walls (for MOST towns and villages at least. It makes sense with Skyrim, too).
Definitely bring back levitation. If you want to preach freedom and openness, make it no holds barred. If it detracts from the game, that is for me to decide and to use it.