Due to optimizations that they've made on textures, npc actions, general size of the towns and geographical map of skyrim that large scale battles is gonna be more akin to how it was in oblivion..they can only go so far as what the 360 can handle...as for the creation kit on pc..im sure they've optimized it to take full advantage of npc schedules and whatnot...im pretty confident that this creation kit will make total conversion mods slightly easier as well...they seem really anxious to reveal the creation kit so maybe stuff like enclave commander mods and sand dunes plus the cube wont be so hard to mod into the game this time round...

I would think this is more of a hardware limitation rather than the game engine. In oblivion you could add tons of npcs or creatures in one place with a mod if you wanted but it didnt most didn't because you would need a better machine to run it.
Since console hardware isn't changing anytime soon and even PCs could choke on the work I doubt well see much larger battles, maybe slightly bigger due to ai optimization or engine optimization but not by much unless I'm severely underestimating BGS.

Well I cant forget "Epic Battle" at Bruma Gates it was so outstanding and great!/sarcasm
http://images.uesp.net//1/16/OB-quest-Bruma_Gate.jpg
and The Attack on Ynys M?n for Morrowind
http://projectmanager.f2s.com/morrowind/YnysMon.php

Why not generate larger number of troops generic rankers for such battles they are not need to have deep personalities since we shall meet them only during epic battle, while battle we will not ask them about their biography don't watch their daily schedules, don't make large and deep conversations thats battle there is no time for this, they will be removed after end of quest battle.
I think Mount and Blade is best example we have some officers with personalities and generic troops for battles, such things possible since even Oblivion and Morrowind capable for this.
http://www.youtube.com/watch?v=ccRKQTPYX1I

Whenever the NPCs go into battle, they should be replaced by simplified enemy NPCs that only have combat AI, so they don't lag upthe system.