I actually preferred the Oblivion map as it was well, "a map" and didn't look like a "satellite view".
While Oblivion's map looked more like a map that your character could actually realistically have, I still liked Morrowind's map better precisely because due to its "satellite view" like look, it provided a better indication of what the terrain of the game looked like, and shows a better indication of what locations you had explored, I guess it comes down to a matter of preference, though, some like to have a really "immersive" in game interface, which is probably the kind of reasoning that leads to things like Fallout 3's Pipboy, but personally, I'm not too concerned with the look of the interface, the map included, as long as it isn't offensive to the eyes. Mostly, what I want is interfaces that are practical, giving me access to all the information they should tell me when I need it, but that are still unobtrusive when I want them to be. Morrowind's interface was not fancy, but it makes the necessary information more conveniently available than Oblivion's. And the map in particular I liked because I could easily see where I had explored before, it also reflected the terrain better than Oblivion's.
But I would say that the advantage of showing where you have explored does not necessarily need to be sacrificed to keep a more realistic map like Oblivion offered. It would simply require a different style of map, anyone who has used mods for Oblivion might notice a number of different colored map mods of varying styles, perhaps the map could, by default, be without color, like the Oblivion map, but when you explore a part of it, that part could be replaced with a colored version, similar to the various colored map mods, the game could even go a step further by just showing the basic terrain at first and then adding details like roads or towns, and maybe even text identifying regions and such, after you have explored the proper locations. I'm not sure how easy this would be to do, but if it could be done, I think it would allow the game to have some of that satisfaction of seeing more and more of the world map filled in with color I always got in Morrowind, while still preserving some of the realism of Oblivion's world map.
And allowing the map to update to reflect changes to the terrain added by mods is definately a must, I would say, it always annoys me that in Oblivion, none of my mods that add new locations are reflected on the world map, and yet when I search for a map that has one or more of these mods on it, chances are that it's either not in the style I want to use, or it also includes mods I am not using. I never had this problem in Morrowind because the map would already show changes to the terrain added by mods by default.