I would really love to see this, I read (can't remember where) that originally there were plans to implement wars between the kingdoms, with sieges, etc (if I'm not mistaken). Would be awesome to be able to see / take part in large scale battles, with catapults, archers on the cities walls, etc.
Other elements I'd like:
Making the provinces more unique, with more differences, i.e a large amount of unique artwork in buildings and clothing for the main regions such as Daggerfall, Wayrest, more dialogue associated with the regions.
The other races as visible animated NPCs (as Luzur mentioned)
To have more weapon types, like spears and throwing weapons (such as in Morrowind), with the spears giving you a ranged advantage when compared to a sword. (Spears are my favourite weapons in Morrowind).
To be able to put usable candles in buildings, even better if you could set up your own camp-fire in the wilderness