http://www.gamesas.com/index.php?/topic/1172374-simple-ways-to-make-cities-more-alive-interesting-and-bigger/
Here's a thread where I discuss ways I think a city could be made to SEEM bigger without being so. I personally like having more compact cities, although fair enough that the upper class should have more open space.
Even if my anolysis was accurate, they may have expanded the cities since then, so who knows?
Oh, I don't doubt that cities can be made to look bigger, I have a fair understanding on those types of things, however, Skingrad still felt just as empty as the other cities despite it being a more compact city then any of the others. There are so many ways to make a city feel more alive then oblivion did, then again oblivion isn't a game that has you inside of cities for all that much, with the exception of the arena... I am hoping Skyrim has much more interesting cities. The best way to do it would be active city centers... a large/open city square where you have a lot of NPCs (venders, beggers, street performers, and random NPCs) while having tighter side residential streets would create a more alive city, that said, I wouldn't want it like Assassin's Creed where you are constantly pushing your way through people no matter where you are (even out in the country side.... for BLEEP's sake). People should gather up more tightly at points of interest and less densely to let you travel around.
To top of the city square, it's nice to have around the square accessible shops, pubs/inns, restaurants too... Still, by the sounds of it, most that stuff is already done or designed in skyrim, so have to see what it is actually like. I am still sure in an interview they mentioned 5 cities that were larger then those of oblivion and about 20 smaller towns... It could be that some are still under construction or being consider tho, so it could a more accurate answer isn't there yet.