Part of the problem was that Oblivion's interiors were mainly made from a limited number of "canned" sections, and the same limited set had to do for both "upscale" and "ramshackle" places. Other than furnshings, there was nothing the interior builder could do to make one look "slightly different" from the other 40 or so places of the same general type.
Morrowind didn't use "sections" for most of its locations. The interiors were frequently hand-assembled from individual wall pieces, floor tiles, and other basic shapes, with the freedom to tilt them into "ill-fitting" angles or make other small adjustements in each individual item. You could place one step of a staircase at a slight tilt, and the rest "on grid", or lay planks with varying gaps between them. It was far more labor intensive, but gave that magic touch of "tender loving care" and uniqueness to the world.
Using pre-made sections, but being able to superimpose "variant" sub-pieces over it to create things like damaged or loose blocks or boards, might make the game almost as quick to build as OB, but with enough of the varied appearance of MW to look believable. The only other viable answer I can see would be to create a lot more "alternate" sections for each tileset, some worn or dirty, some clean and new.