Connected, as they were rightly done in Morrowind. This closed city stuff was a travesty that should never have happened.
Hopefully the new engine will remove their lame excuse for having done it to begin with. Which turned out to be unnecessary anyway.
This sums it up well I think.
Like having a train of monsters follow you back into town.
And that's bad because...?
If it's feasible from a technical standpoint, then obviously I'd prefer an entirely seamless overworld.
However, I'd really love to see some huge, dense cities, the kind you could explore for hours without seeing everything. If it meant having them as separate areas, I'd been fine with that.
Either way, I'm happy, as long as there are plenty of small backwater towns and villages dotted around that are seamless.
I also have to agree with that point - huge dense cities to explore as separate areas would be well worth the trade-off.
And on your last note, I hope the 'small backwater towns and villages' in Skyrim are bigger than they were in Oblivion. Or at least, that some of them are. Variation would be nice, rather than having them all tiny again.