Pointless space is a pointless waste of time.
Morrowind actually managed to cram a huge amount of stuff in quite a tiny space without making the game world seem overly compressed, making clever use of terrain, fog and architecture to make the game world seem much bigger than it actually was. Two towns might've been just a two-minute walk away from each other, but the road between them might've taken you around some hills, over a bridge and past some caverns, perhaps also letting you run into one or two NPCs or quests on the way, so it felt like an actual journey despite being so short. Although some of the actual towns could've been a bit bigger, it's still a great example of how to handle scale in an open-world game.
In general Bethesda are pretty good at this kind of stuff, even though they've somewhat drifted towards amusement park design and towns with a population of ten people, with Skyrim probably being the best of their post-Morrowind efforts. As an another kind of example you could mention New Vegas, which is a damn good game with a well-realized open world but doesn't handle its sense of scale all that well. For example, the first trip you'll make is most likely to Primm, which you can actually
see all the way from Goodsprings. Even though the trip between the two towns might actually take more time than a trip between, say, Balmora and Caldera, it feels much shorter, is more boring (since you can immediately see everything that lies between you and your destination and can just take a beeline to it) and causes the game world to feel really small and compressed as a result. The towns usually consist of one or two streets with all the notable buildings conveniently located next to them, with maybe a few (mostly abandoned) shacks here and there reminding you that you're supposed to be in a town, whereas in Morrowind you might have a side alley that hides a corner club, a big multi-level building that is filled with apartments, shops and guildhouses, or simply a row of houses with their own residents that may or may not be important in some way. All this allows the game to hide its rather small scale and also make exploration more interesting, but an experienced player can still navigate the game world very quickly once he learns the layouts.
tl;dr: It's only a waste of time if you're the worst kind of n'wah.
