The further TES gets away from the term "Paper Doll" The better, this is just one huge, decisive step. Now if only we could stop people from saying "Toon".
Paper doll was a proper term, since until Oblivion it was a 2D rendering which had 2D accessories you could see added. Oblivion actually had the right system in that you could see you character in 3D and rotate him/her, rather than the camera itself, thus making it no longer a paper doll. But, like many of their best features, Bethesda has scrapped it.
Although I
do hate the word "toon," and part of the reason is that it originates from games (like WoW) where characters do look like cartoons. Unfortunately, that does apply to Oblivion, with their blobby models and over saturated colors and lighting.