Overland distances have been given in the lore. e.g. the distance from Mournhold to the summit of Red Mountain.
And this is how the Imperial City is decribed in lore:
The Imperial City
Refayj's famous declaration, "There is but one city in the Imperial Province,--" may strike the citizens of the Colovian west as mildly insulting, until perhaps they hear the rest of the remark, which continues, "--but one city in Tamriel, but one city in the World; that, my brothers, is the city of the Cyrodiils." From the shore it is hard to tell what is city and what is Palace, for it all rises from the islands of the lake towards the sky in a stretch of gold. Whole neighborhoods rest on the jeweled bridges that connect the islands together. Gondolas and river-ships sail along the watery avenues of its flooded lower dwellings. Moth-priests walk by in a cloud of ancestors; House Guards hold exceptionally long daikatanas crossed at intersections, adorned with ribbons and dragon-flags; and the newly arrived Western legionnaires sweat in the humid air. The river mouth is tainted red from the tinmi soil of the shore, and river dragons rust their hides in its waters. Across the lake the Imperial City continues, merging into the villages of the southern red river and ruins left from the Interregnum.
Tamriel is a continent not a small island. It's not as large as north america, but it's still a very big place.
In lore the Imperial city is a metropolis on a huge island within an inland sea. There are numerous towns and villages on the same island. The island on it's own is as big as some states and countries.
The Niben is not a 'river'... again it's a sea like the persian gulf or the red sea. You would not be able to see from one side of it to the other, the curve of the globe would prevent that. The Niben is over a hundred miles wide east of Bravil.
And Bravil is a large city. The cities present in Oblivion are not the little towns portrated in game, they are the largest cities in Cyrodiil... each with thousands or tens of thousands of inhabitants. There are other more minor cities and hundreds of towns and villages that don't appear in game at all because the scale is so compressed.
Every computer RPG compresses the scale (well except Daggerfall). Waterdeep is nothing like it's portrayed in the NWN games, for example.
Some of us feel that Oblivion goes a bit too far though, especially with the distant land which stretches suspension of disbelief beyond breaking point.
http://img133.imageshack.us/img133/6766/sizeoftamriel.jpg <- I pasted a roughly scaled copy of a map of Cyrodiil onto a map of the united states. Cyrodiil looks to be about the size of Texas.