It's very hard to do sheer cliff faces without a smarter terrain system. Unless it's programmed otherwise, making landscape features that are too steep will stretch textures horribly. It'd also be nigh impossible to stretch the terrain outwards. It would also make for some pretty poor looking details if not done properly. It'd be nice to have such stark contrasting features like that, but the open worlds of Elder Scrolls games make it very difficult to accomplish in ways that games with limited environments aren't hindered by.
You ever played Red Dead Redemption?
World is even larger than Oblivion, but they have cliffs and beautiful landscape.
Also, http://unrealitymag.com/wp-content/uploads/2010/05/large-video-game-worlds2.jpg
I've never played Just Cause 2, but that's pretty impressive.