Hell, didn't Daggerfall have generic, repeatable quests?
Yes. It becomes very noticeable after a while and it's far more immersion-breaking, in my opinion. It becomes a chore.
I guess I wouldn't really be bothered if it was just random NPCs would give these quests, because then I could ignore them, and for people who want to constantly do the same quest with slightly different scenarios, then they could.
It could go further than just "different NPCs, different dungeons, different rewards." Entire plot points could be changed. It could randomly determine if you get betrayed by your employer or if an assassin attacks you in the dungeon and a bunch of things like that, but again, after a while it just becomes too predictable and stops being new.