Considering the developers use the last months of level designing placing the items in the world, I think it's good time for me to try to reason with them.
Item Placing
One of the many things I loved about Morrowind was exploring. I got the game with my 3D card and I didn't really understand enough English to follow quest lines. I loved the fact that when I entered a random tomb I could find spiral staircase that took me to labyrinth inside of which there was Nord warrior with tons of great loot, one of which was the best heavy armor helmet in the game, hidden from view though. It really made exploring and dungeon crawling rewarding and believable when you found random dead adventurer with rather good gear even you were just level one - although you rarely could survive these dungeons if you were weak. The monsters didn't level much with you. In fact, if you went into a tomb out of your league, you died horrible and swift death.
To this day it's the thing that brings me back to Morrowind. I didn't have Internet back then, so now I can see all kinds of stuff that I missed. Oh I didn't know that you could access that daedric face of a god if you levitated up the cave in the nord burial tomb. Oh great, there's pair of pretty great gauntlets behind that bowl of corpus meat in one of the sixth house base you go through in the main quest.
Stuff like this made the world believable. Like these people really own stuff, outside what they are carrying. They may have glass armour on the shelves, ebony blades on the table. If you had swift hand you could steal them, but you probably had to fight that guard first that was standing right next to it calling you n'wah outlander. I could even kill the old Telvanni wizard and get almost full set of daedric armor off him, if I could beat him. Mind you, he was part of the main quest, and I could kill him before or after I was done with him.
This was one of the big setbacks in Oblivion. When you were level one everyone was wearing leather or chain mail. Once you gone past level 20 you could face bandit with full set of glass/daedric armour coming at you. What are these fools doing? They are carrying so much money on their armor they could retire and spend the rest of their lives getting drunk of skooma in the house of earthly delights.
You never found items higher than steel from the world. Even the alchemists had novice/apprentice set of tools on his/her table. Best alchemy tools could only be found in random loot once you were high enough level from the pockets of some random scrub necromancer.
This fact made me skip every mine and cave in the game, pretty much. Unless there were goblins outside, in which case I would steal the totem and watch the rival goblins fight for their totems when I dropped them in the world. After fighting through multiple caves with nothing more than few lions and rats I decided to use them just for getting mushrooms when I needed some for alchemy. What an waste of level design, I think.
Only dungeons worth crawling though were the Ayleid ruins, for their valuable Varla- and Welkynd Stones other items placed on the tables were usually not worth going through, unless it was a note or a key. It was usually always something you wouldn't bother even picking up.
I think this was somewhat of an response to the 16 minute (or something like that) speed run of Morrowind at level 1. How the person managed to do that was that he knew where he could find good alchemy tools and stack potions that he could beat Chuck Norris with one finger. The developers didn't want you to find good loot until you were high enough level. However I think this type of handing the "problem" was wrong. No one would think that the player of that speed run was playing Morrowind for the first time. The fact that he could pull it off was because he had obviously played Morrowind a lot.
Looking at the later games with same engine (Fallout 3 and NV) the lesson had pretty much been learned. Not to the extend it was in Morrowind, but still vast improvement over Oblivion.
TL;DR: Level scaling items and only cluttering the world with rubbish loot takes away the fun of exploring and stealing, which I'll try to tackle on the next point.
Stolen Items
Sneaking in Oblivion was done way better than it was in Morrowind. It was so good that I decided my first character to rely on stealth when I first started Oblivion. Stealing was great concern. There was little stuff to steal (see the first point) and if I would steal that strawberry, every vendor in the world knew that strawberry was too hot of an item to buy. Oh I don't want to buy that strawberry, you obviously stole that from Fargoth. I heard Fargot looking for that particular strawberry. I had to join Thieves guild in order to sell that hot strawberry.
Really?
I think mix of Oblivions and Morrowinds system would work best. ( To the "Why not like Daggerfall people: In Daggerfall, you could steal everything vendor has during the night and sell it back to him without the vendor saying anything - Morrowinds way of handling stolen goods was an improvement).
In Morrowind you could sell stolen items to everyone except the person/people you stole them from. It makes sense. However you didn't know what stuff was stolen. You could steal an diamond from Alchemist, carry it in your inventory for days and later try to sell the 35 diamonds from your inventory to get guards after you, because one of the diamonds you had in your inventory was the very same diamond you stole from that Alchemist.
TL;DR: Oblivion was too harsh on thieves. Every trader magically knew that that carrot you stole was really stolen. And, there wasn't really stuff worth stealing.
I propose following ways to deal with this:
Stolen items have the indication that they are stolen in every item listing (even alchemy screen).
1) You can sell the items to every vendor except the one you stole them from (Morrowind system).
2) You can sell the items to every vendor except the one you stole them from, but for a half price.
3) Only shady traders will accept stolen goods. There would be quite many of these traders, maybe even as much as half of the traders in the game. Quite like the "I don't want to trade with you if you have drugs" system worked in Morrowind, except you wouldn't have to drop them at their nose before they'd open their inventory for you. The stolen items wouldn't show up in the trade screen of more law abiding traiders.
4) System where the "heat" of the items drop after some time.
Discuss.