I find it odd you even mention Redguard. There was no discovery in Redguard. It had about as much immersion Jedi Academy. Games were you play a set char, with a set personality in a very story-book low deviance non-freeform plot really shouldn't have even carried the TES name.
Linear is the word you're struggling to remember. It isn't a dirty word, and has a long tradition of being part of meaningful storytelling right back to the invention of writing. Dreamfall might be the equivalent of an interactive movie where you occasionally press a button to get to the next scene, but it's one of my favourite games, primarily because it's unique and meaningful. Discovery in this case is a matter of finding out what happens next, and is all the more rewarding because of the emotional investment in the character. Adventure games are better able to manipulate one's sense of scale and expectation primarily because they're linear. Redguard, despite its small size, was of a scale that was believable and convincing, and had enough variety for that size that it never really felt repetitive, as was the case for all the other TES games to varying extents.
That "game" was just so...cookie cutter.
Er. It was a hand-crafted world. I don't think you understand the meaning of cookie cutter.
For instance, in Morrowind there were a huge amount of empty expanses like you said. That meant there were a limited number of dungeons. What was there to do when you cleared allt hose dungeons? Nothing.
Considering how many hours it would take you to clear every dungeon in Morrowind, I don't think that's a terribly convincing argument. If all the dungeons are going to be more or less the same, I really only need one re-generating dungeon. Or a copy of Diablo or a http://ivan.sourceforge.net/img/Holyscreen33.png game.
I wouldn't be opposed to a TES game taking place entirely in one city. A city provides one with the sort of opportunities necessary for sandbox RPGs and the sort of discovery necessary for fulfilling exploration. Cities are where tourists visit to satisfy their thirst for adventure, their longing for a cultural education, their desire to immerse themselves in the different and the strange. And cities are ideal for the act of role playing, which isn't only decided by what manner you kill things, but by your relation to other people.
Basically what I'm saying is the Daggerfall had loads more replay and RP value then Morrowind/Oblivion.
And basically what I'm saying is that Daggerfall was loads more repetitive than Morrowind, and maybe even Oblivion. Once you realise they're really all alike, 20 different guilds and three billion dungeons doesn't really carry much truck, and you're better off playing something like Dwarf Fortress.