The Xbox 360 and PS3 hardware say no, the cities will remain in seperate cells.
Yeah, this is the biggest problem.
Now just because they are in separate cells
doesn't mean you can't look through windows or open doors, nor does it mean that transition between the cells will happen with a loading screen. It can as well be seamless, with a similar technology as seen in Prey and Portal.
It
does however mean that "interior" and "exterior" geometry isn't technically connected, besides at the portals themselves, which makes effects like (on-screen) destroyable buildings very, very hard to do - likely impossible.