Is it an interesting addition? Yes, I really loved the Euphoria engine in Red Dead and GTA4, it gives a better sense of immersion.
Will it improve the gameplay? Maybe, most likely no. Implementing it would require a lot of sacrifices in terms of gameplay, and there would be a bunch of glitches everywhere.
Will it work? No, even if it supports Gamebryo or no, it won't work well, it will be most likely full of glitches, and will cripple the game in many ways.
Can it be implemented in TESV at this stage of production? No, the game is most likely into the final stages of development (If we consider a Fall 2011 release) , delaying the game to add it would also not be worthy.
Will it ever be in a Bethesda game? Most likely no. IMO, I don't think it suits their type.
You are too narrow minded. I'm pretty sure I heard that Bethesda is developing a whole new engine for TES V. There are bugs in every system, they can be worked out. Gamebryo svcks, I'm pretty sure their dumping it.
Can it be implemented in TES V at this stage of production? Yes. The game has no release date, Oblivion was in development for 4 years, and was started right after Morrowind. Bethesda worked on Fallout 3 right after Oblivion, and they have been working on many other projects as well. I don't even think they have a construction set yet.
Will it ever be in a Bethesda game? Maybe. It actually does suit their type. As adopting Gamebryo or speed tree, or havok, they like using middleware and third party solutions, Euphoria is a third party animation solution... Horrible animations is not their type, but a particular flaw.
Will it improve gameplay? Yes. Did you read that post detailing the awesome ways they could include it to make combat more immersive?
Euphoria would solve all their problems with Oblivion's combat system. Rather than making every single attack hit your opponent but only do minimal damage, and expect the player to accept that he has to cleave a goblin's flesh 50 times with his sword before it dies (if the sword isn't a primary skill for his character), Euphoria could have an enemy 'block' or 'dodge' every attack that isn't the killing blow, but still reduce it's health meter. The blocks and parries would look last-second and clunky, compared to an actual block that was initiated with the right-click button (on PC), and the dodges would be near-misses, rather than real dodges. You could also have attacks bounce off of heavy armour with this system too. Only the final attack would score a hit, and kill the enemy as a result.
Weak enemies would die in one or two hits. Average enemies in five or six. And boss mobs would live up to their reputation by giving you a grueling and skilled fight, full of blocks, parries, and dodges, before you finally get that satisfaction of running them through with your blade. No more slash, slash, slash, slash, slash, slash, slash, slash, why aren't you dying, why aren't you dying, why aren't you dying, die, die, die, die, DIE! Much more immersive, and so long as they balance the health meters correctly, it would be really satisfying when that killing blow lands. Like you really worked for it.
This is just one man's ideas about how to use it to improve gameplay.