Firstly, I thank you for your thoughtful and beautifully phrased post, which I'm tempted to call a "treatise", in the vein of old essays written by Enlightenment philosophers, as it is such a refreshing change from the "lol Morrowidn r0x oblivion sux!!1!11" posts I so often see.
I think that Morrowind had some points that Oblivion is lacking. Each new town you visited and creature you encountered in Morrowind was different and unique in gaming terms and gave me some of the most memorable first impressions of any game. The tiny fishing villages of the Bitter Coast, lit only by the central torches and constantly harassed by flying jellyfish of doom. The kingdom carved from the carapace of a crab was a truly inspired point of culture and history in Tamriel. The North-Eastern areas with mushroom-citadels looming in the middle of islands lush with oversized vegetation. The emaciated, headless four legged Nix Hounds and the Crocodile-Chicken-crossbreed Alits. They were all marvels of art design.
I remember having one of my best experiences of gaming ever in Morrowind, where I had broken into a fortress (Peligiad), and stole many shiny objects. During the burglary, I was spotted and forced to leap from the battlements, and run through the town as the chase began. Over the next week (game time), my speed was the only thing that saved me as I got increasingly lost in the swamps until I eventually circled back to Balmora, and paid my fine off.
It was a marvellous gaming moment, not because of the events - but because I was not compelled to reload. I had messed up a simple theft, and yet I was happy; lost, diseased and marked.
But, Morrowind hates you. And as much as I like the ocassional feeling of discomfort in a game, Morrowind was an abusive marriage. You covered your bruises because of these few moments of gaming bliss, and convinced yourself you were falling down the stairs every time.
As soon as you stepped out of the Ascadian Isles or the Bitter Coast, you were confronted with miles and miles soul-destroying ochre, brown, red or grey landscape, the only features being tangled trees and pteradactyls that chased you incessantly.
As soon as you stepped into a hole in the ground in the hope of finding loot you would be confronted with an insurmountable enemy, who would instantly stab you in the face until you were forced to exploit the AI's inability to go through doors.
The missions were badly designed, especially in the Theives' Guild or Morag Tong. One mission, which required you to steal a Dwemer Tube from a box from a shop in Gnaar Mok, had five NPC's staring at it, 24/7. Assassination missions required you to walk into an inn and shiv someone in broad daylight, and present a piece of paper to the police to "get away with it". Awful, repetitive mission design, that was there seemingly just to spite you.
The skills system was infuriating, especially enchant and Marksman. It was such a terrible grind to level up enchant, because you would have to make dozens of "Shirts of 1% shield" or something before you were good enough to make something worth having. Marksman, similarly, was useless because of the seemingly random boundary boxes drawn around creatures. You could witness an arrow pierce a netch, but do no damage, and then find it later on the ground half a mile away.
Levelling up therefore, provided no real sense of achievement as it represented an arbitrary percentage increase in your skills, which, despite your first person perspective, had very little control over.
Oblivion, while being dishearteningly unoriginal has corrected these flaws considerably.
Every town you visit in Oblivion is familiar, with just slightly different vegetation, a different wood/stone mix and slightly different racial demographics. Each medieval city is unimpressive, and the Imperial City an uninspired Minas Tirith-esque white city with little character in each district.
Most of the creatures you meet in Oblivion have none of the unique flair of Morrowind's other-worldly design, and instead retreat to the standard RPG fare of wolves, goblins, trolls and ogres.
But, the exterior of Oblivion is lush. Not just graphically, with shiny HDR and nice textures, but it's so FULL. The grass is verdant and green, the trees are tall and majestic, the rivers flow gorgeously over waterfalls and the deer skip carelessly through the forests. You never feel as lonely as you did in Vvardenfell's empty north and middle, which makes Oblivion much more fun to wander around.
The fact that ruins and caves are marked on your map means you never have to wander around looking for a brown door in a brown hill, after being given some vague directions, looking for something to do. It's all around you. All the time. The world is literally bursting at the seams with places to explore, and - thanks to the much-improved levelled list system - exploring them might actually BE enjoyable, rather than a one way ticket to face-stabbingville.
By making you control the character directly, rather than relying so much on dice rolls, Oblivion helps you feel much closer to the protagonist. If you shoot an arrow at someone in Oblivion, you will hit them. If you stab someone in the face, they get hurt. It is a marvel of RPG gameplay. You can (and I have) gone through many dungeons without having any armour, because simply stepping backwards will mean you do not get hit - without having to suspend your disbelief as a sword slips effortlessly through your characters trunk but, due to a calculation deep in the game's mechanics, you are left unscathed.
Similarly, Oblivion fixes the pointlessness in levelling up by providing you with perks for doing well in a skill, such as the disarm or dodge/flip perks. This gives you a sense of achievement Morrowind never managed as you sat letting a kwama bite your face until you were good enough at block to stop it.
Oblivion also puts a lot more effort into it's quests. Granted, there is still an array of "Go and find me this specific item" quests, as in all RPGs, but there are many more quests of such exquisite beauty. The Dark Brotherhood murder mystery mission, for instance, is excellently choreographed. The Thieves' Guild's epic final mission and epilogue are beautiful. All executed perfectly, and all achievable without having to remind yourself you are playing a game.
While Morrowind is much more inspired a project, delivering beautiful, unique art direction and moments of brilliance; Oblivion is a much more polished game that is much more enjoyable and infinitely less infuriating to play.
