I am fairly new to Daggerfall. I've played it off an on since Morrowind came out, but never beat the main quest, or really stuck with it. I am taking the time to spend more time with it now, and loving it. My question is, is there any reason or enjoyment to walking out of cities and just randomly walking around? My initial impression is that with the world being as big as it is, i'm not going to find much by walking, as opposed to just picking random locations on the map and fast traveling. Any thoughts?

No, there is no benefit to exploring. Exploring is more of a Morrowind/Oblivion thing. :shrug:

I find that exploreing is only useful when you know where you are going and pretty much the only time that is useful is when you want to find a witches coven.

Edit: also there is two location you can't find by finding maps or getting someone to mark it on your map. One is called "ruins of cosh hall" a dungeon on a little island east of sentinel and the other is the entrance to the last main quest dungeon (which you shouldn't go to because there is no excape unless you have a mark set or your on the last main quest) it is located north east or north west of the ship you can buy. I'm not sure which it is.

This was one of the major disappointments for me in Daggerfall.

In Arena, you could walk out of the city gates and find all sorts of neat things to do: crypts to explore, dungeons to loot, sometimes a boat hidden away in reeds around a lake (whcih you could board and use to travel across the lake), and some interesting scenery. None of it was useful for the main quests or side quests, but it was still a fun way to gain experience, pick up loot, and just explore for the sake of exploring.

When I started playing Daggerfall, I quickly realized that going outside the cities was a complete waste of time: mostly just barren, empty landscape with little variety; towns, dungeons, etc. so few and far apart that you'd rarely stumble across anything worth exploring. After a while I just used fast travel all the time and almost never bothered going outside the city limits; just wasn't any real point to it.

...just passing through...