Here's the skinny:
While a seamless world is definitely immersive, it's starting to feel like the games are taking place in large theme parks, rather than expansive countries. If the gameworlds get much bigger, though, 90% of our time would consist of the epic experience of "travelling forward".
The old systems used in Arena and Daggerfall really did make environments feel more like a "world", but they were sooo huge that the games were forced to use cookie-cutter aesthetics to fill in space. Much of it began to feel stale quickly.
So what now?
Personally, I would love to see a return to the roots. I would love cities full of pointless buildings with hundreds of random NPCs milling around. I would love to walk through the gates of one of the capitals and get hoplessly lost, having to ask people for directions every three streets. I wouldn't mind fast-travel being a necessity if it could bring back the variety of different guilds, timed quests, banks, player-owned ships, etc.
Truly, I'd like to see it done as a hybrid of the modern open world system. Individual regions, each about the size of Whiterun Hold, with their own unique topgraphy, weather, fauna, and flora. Some would have one large town or city, others 2 or 3 scattered hamlets, still others could be pure wilderness. Moving between them would require a fast-travel system, but it would go a long way in giving a sense of scale back to the Empire of Tamriel and the land itself.
What do you think? Would you vote:
1.) smaller but seamless open world, or
2.) more distinctive, individual regions separated by fast-travel?