I take issue with the criticism that Oblivion and possibly Skyrim will be inferior to Morrowind because of a "generic quasi-medieval setting". The material culture and geography are second to how Bethesda will use the history, religion and politics of the province to make you experience that province's immaterial culture.
For example, in Oblivion existing lore for Cyrodiil was underused, we read about a rivalry between the people of the Nibenay Valley and the people of the Colovian Highlands but experience nothing like that in the game.
It were the many join-able factions of Morrowind that made you experience life in Vvardenfell from different points of view. These were missing from Oblivion. There was no police-like faction (Imperial Legion in MW), no religious factions (like Imperial Cult and Dunmer Temple, this was somewhat alleviated with Knights of the Nine) and no cultural factions (like Hlaalu, Redoran and Telvanni). These factions contributed to understanding Vvardenfell and I don't think it was impossible for Oblivion. They, for whatever reason, decided not to go that way. I'm saying that even with a medieval setting a lot can be done to make the province come alive in an immaterial cultural sense (and with that I DON'T mean Radiant-AI).
I do agree that they played it safe with Oblivion. They avoided anything that could cause results that could be interpreted as a bug (see the next paragraph). Factions that were in MW had quest-lines that intertwined. For example the empire sanctioned Thieves Guild and the Imperial Legion both were in conflict with the unjoinable Camona Tong (Local crime syndicate) which itself controlled the higher echelons of the Fighters Guild. Depending on which path one took, completing for instance a certain quest-line in the Fighters Guild could later halt progress in the Thieves Guild. Personally, I had no issue with this, on a next play-through I'd simply follow a different path. However, some players experienced this as a bug, while it actually was a consequence to a decision of a player.
During development of Oblivion some of the Devs said they wanted to avoid that players felt they “lost control”. Result was the implementation of surgically clean guild quests (Fighters Guild vs Blackwood Company and Mages Guild vs Necromancers) where it was made sure NPCs weren't shared between quest-lines of the various guilds. Another thing the devs wanted was that on a play-through the player could join all factions. In Morrowind you would need several play-troughs to experience each guild. This “feeling of losing control” has also been seen recently in New Vegas where being unable to continue a quest as result of players choices were thrown on the bug pile by those players. (i.e. not every uncompletable quest is the result of a bug). Lack of hand-holding is nowadays considered to be a bug. In Oblivion another result of removing the feeling of “losing control” was the implementation of Essential NPCs. If in Morrowind you killed an quest-related NPC you couldn't finish a later quest that also used that NPC, you needed to reload or give up finishing the quest-line and do better in the next play-through.
Concluding, it is not so interesting to me if the material culture and geography in the game is based on an LSD/Mushroom trip. It is far more interesting if the developer lets you experience the history, religion and politics of a province through interacting with it's factions and peoples. To get a great experience, the material culture and geography don't have to be strange, weird, alien or peculiar but Bethesda needs to create an experience of the immaterial culture of whatever province they set a game in. After Morrowind, I knew Vvardenfell because I experienced it from different cultural, religious and political points of view. After Oblivion I didn't know Cyrodiil, it felt vanilla not because it had no giant mushrooms but because by the end I didn't get to know how society intertwined in Cyrodiil Depending on the effort Bethesda went through with Skyrim, it could go either way. Point is the material culture is the least of my worries.
Sidebar: As long as the Elder Scrolls are made for consoles some of the things I like about Morrowind will never return (wiki-style dialogue) but I hope they can overcome the limitations of modern technology such as Full Voice-Over and still deliver a province rich with cultural and political factions interacting.
Ever since I had the pleasure of playing Morrowind, I've decided to buy all RPGs BGS makes since then. There will be disappointments but I don't want to become jaded. Despite the swing to the consoles I hope they have used their experience with Oblivion and Fallout 3 as a foundation they feel comfortable with and build upon that to bring some great things of Morrowind to Skyrim (like more factions and a detailed back-story of the province, not referring to giant mushrooms here).
