I think some people are missing the point of this entirely.
Firstly, it would be realistic in scale. That doesn't mean it would have to realistically reflect the real world. It could be just as weird and wonderful as something like Morrowind, just a lot lot larger and more built-up.
Secondly, for those of you who think an enormous gameworld the size of an actual country isn't possible, go play Daggerfall. That was released in 1996. We're now in 2011. It's possible. Obviously the quality of graphics wouldn't be on par with Skyrim or Oblivion, but it's a good trade-off for more scale and depth in my opinion.
Daggerfall is mostly procedurally generated, though. Most of their towns have only minor differences, and furnishings are minimal. It would be interesting to see it done again today, though, with new methods of procedural generation.