I think they should release a demo. There are other open world games that make a demo, the argument of not being able to capture enough of what the game can offer is an easy way out. The purpose of a demo is not to show you everything the game has, but to allow you to test before buying if you like the animations, the controls, the combat, the graphics, the sound, and how well your hardware can run the game. For these you don't need to access the whole world, a starting dungeon is enough.
But Oblivion isn't all about the dungeon exploring
For me I would like to see how immersive the towns and cities could be