Don't forget Bloodmoon, now.
Secondly, I haven't played Tribunal, yet, so correct me if I'm wrong. Wasn't Mournhold just made an interior cell because they didn't want to create the mainland?
Besides, the huge walls presented in Oblivion look retarded. Open Cities, much?
Bloodmoon isn't really relevant, its towns weren't separate cells and you could levitate there.
I agree that every city being walled in looks odd and inorganic (I mean seriously, there should at least be a handful of lower class houses outside the city walls if nothing else). Its just a trade-off, and I happen to agree that its a good trade-off as having large, detailed cities is a very good thing. A compromise might be to somehow make an invisible transition from one cell to the other as opposed to the doors, that way you're just walking along, you have a load screen, and then you continue walking up to the city (as opposed to going through a gate) - this would require alot more work at creating the mock-environments though so that it looks realistic, I also don't think it could be done on the Oblivion engine.
Yes, that is why it was an interior cell, but it also set the precedent for Oblivion. Morrowind's engine had no accommodation for creating mock-exterior cells like Oblivion's does. With Oblivion, you can make a copy of the landscape and use it as a model to put your city in - it'll be separate from the general gameworld, but it'll look like part of it - it can do this because it has more than one exterior terrain map. Morrowind however only had one exterior terrain map, so if you wanted something outside you had to put it in the same exterior cell set as the rest of the island - they got around this with Mournhold by adding a feature that made the sky texture visible from interior cells. This is where Oblivion improved upon Morrowind; if you jump over the wall in Cheydihall you'll land on terrain, it'll just be barren terrain that's a filler, if you jump over the wall in Mournhold you fall into a void.
The reason I brought up Mournhold is because that's when they first banned levitation to stop you from flying over the wall and discovering their trick, they carried that idea over into Oblivion.
Well, they can't scrap any parts of it because that will call up the canon [censored]. Anyway, it's probably going to take place hundreds of years into the future so there can be completely new NPCs and cities could be completely different than how they were.
The events of
The Infernal City guarantee the general atmosphere is going to be rather changed.