I think I can agree that I preferred needing to explore to find locations in Morrowind rather than being just pointed to exactly where I need to go. I wouldn't necessarily say the quest compass was always a bad idea. I mean, it could be pretty helpful for finding NPCs in towns. In Morrowind, finding them was pretty easy unless they were meant to be hard to find because they always stood in one place, at most, they might wander around in a set area, they'd never leave the building they're in unless a quest dictates they should. So characters could just tell you where a character lives or where to meet him, and you could find him easily. But in Oblivion, due to radiant AI, NPCs tended to wander around, as such, NPCs really couldn't just tell you where to find them, and it can at times be a little troublesome when I'm looking for characters who do not have quest markers pointing to them, like ones who are not involved in active quests. Of course, some NPCs aren't in the habit of wandering around, but a lot of them are. However, dungeons and towns aren't going to move around, so finding them based in directions is not really a problem, sure, it wasn't always easy in Morrowind, but usually, with patience, I could find even pretty easy to miss places.
Still, I think we can probably assume the compass is here to stay as telling you exactly where you want to go seems to be the trend in games as of late. So my suggestion is to make the compass optional. I can't see it being too hard to add an "enable/disable quest markers" option. The main challenge with making the compass optional would be adding directions for quests, because allowing players to disable the quest markets would be quite meaningless if there is no way to find places without them, but it is doable, it just requires a bit of extra dialog for NPCs to tell you where to go. Even if you're using the compass, it would make sense for role-playing purposes for such dialog to be in the game because your character wouldn't psychically know where a place is simply because it was mentioned by name. Admitably, some quests in Oblivion adressed this by having NPCs say they would mark the location on your map, but not all quests had a line to that effect, yet often, even though that did not happen, you'd still know where to go. And in Morrowind, NPCs would often still give you directions on how to reach a place even when they mark it on your map. Of course, the game didn't have as many map markes as Oblivion, but generally, towns and cities still tended to be marked, and this made sense too since even if you know the position of a location on your map, you might not know the easiest route to get there.