Looks wise, don't expect Skyrim to look radically different. Sure the graphics might be a bit better, however its art assets are still going to be made by the same people who did Oblivion/Fallout... so the art style will be similar, and thus Skyrim will likely look like a slightly better looking Oblivion. To expect it to be night and day compared to Oblivion is irrational.
When it comes to the engine, the biggest difference is certainly going to be the feel of the game, and how it plays (hopefully a lot smoother). Looks wise, the odds are its going to have a very familiar look to it.
I think you got way too low expectations.
Do you even realize how much have been improved in terms of technology and its development since 2006?
Now, almost every game looks like Crysis did in 2007, which is really good. That's what my expectation is, and it's definitely a realistic one; not an irrational one.
There are tons of new games that look like Crysis in 2007 (or almost like it), and I can just keep mentioning names after names after names. The point is that, if Bethesda wants to keep up with graphics, which is an important part of a game nowadays, they will need to keep up with these expectations that other games have. With Fallout NV being critized for its bad graphics, the demand is even higher now.
"Slighly better looking" isn't enough nowadays. Slighly better looking Oblivion is basically what Fallout 3 looks like, and even that looks very outdated now.
If you can tell my why Skyrim wouldn't be able to look as good as other games do nowadays (Red Dead Redemption, Crysis, Just Cause 2, The Hunter, Mass Effect & Uncharted series, Stalker, Gears of War, Halo Reach, etc...), please do.