Wow... you're really taking this into the wrong direction... I mean 180 degrees in the wrong direction.
1: The man is an EXPERT blacksmith.
2: It's ONLY a sharpening wheel, and there's no way he can cut himself.
3: I guess after so many years (like... 20+ years?) of being a blacksmith he doesn't have to look at the axe when he sharpens it (personally I think even I would be able to do it without looking at it for a couple of seconds while talking to someone).
4: The worst he can get out of it is a scratch.
5 and most importantly: How the hell can you say it's not better than Oblivion's dialogue system? Know what? Alright, they might as well put in Oblivion's dialogue system, I guess there's no difference ha?
Oblivion dialogue system (for you information):
- Time stops while we speak to the NPC.
- The NPC can move his head - ONLY (which means he can't do other jobs like sweeping, sharpening, etc.)
- There's a MASSIVE zoom in when a NPC opens up a conversation with you.
- The NPC looks at you and you only.
- Conversation is a MODE the game is in (somekind of a mode).
Skyrim's dialogue system:
- Time carries on.
- There's no zoom.
- NPCs carry on their normal jobs/actions.
- You can have multiple conversations at once.
- You can leave a conversation whenever you feel like by just walking away.
- There's no persuasion game, which means the way NPCs feel about you is determined by choice rather by a mini-game.
- We don't know if NPCs will ALWAYS look at you while conversing, and even if they do, at least they carry on with the things they do their entire lives and don't have to look at what their doing each and every second.