That way you could keep the Imperial city in the game without having to turn the entire gameworld into the city and its immediate surroundings
The question isn't whether or not you'd want that, but what would you want your gameworld to be.
Answering "Cyrodiil" runs in a couple of problems:
- Cyrodiil is fucking huge, your game is going to be fucking tiny. Cyrodiil also is the heart of the Empire, it does not have excuse of being some backwater province of ash or snow, it needs to be portrayed as cultural and commercial centre of the Empire.
- Cyrodiil lacks focus apart from IC, if you exclude IC your game will be unfocused and hang in relative vacuum lore-wise.
Answering "a city in Cyrodiil" runs into similar problems. Scale won't be as extreme, but you run into arbitrary border problem instead and still have to deal with having to hang in relative vacuum.
You could answer "planes of Oblivion", but you'd have to deal with numerous difficulties resulting from said planes being far from friendly place and from lack of counterbalancing normalcy.
You could answer "anywhere, then the planes of Oblivion" to deal with normalcy, but that would still be difficult to pull off, although potentially interesting.
Alternatively answering "Imperial City" solves most problems:
-it's effectively everything interesting the province has to offer condensed into an area you could plausibly pull off with beth's technology.
-it is small meaning you won't need noticeable downscaling
-it is surrounded by natural barrier meaning no invisible wall
-it allows you to pool all the resources for citybuilding into one, impressive place
-it sidesteps problem of having something to fill gameworld with, one OB failed to handle
-it's already described in lore meaning you know WTF are you doing
-it's described as having a lot of z-axis and z-axis = good.
-varied types of locations are described and justified in the IC and its vicinity - entire districts built on bridges, slums underneath them, marketplaces, seweres, elven ruins (the city was built on the remains of elven citadel), a cave system or two linking to sewers and/or Ayleid ruins, abandoned fort on an island nearby that fell into disuse after the empire solidified its hold on the land, some wilderness islands not mentioned in the lore due to their small size and low importance.
-such gameworld would have relatively high water content giving waterwalking and waterbreathing a lot of utility
-you know what follows from large body of water surrounding a city built on ayleid ruin? sunken ruins and exploration, also shipwrecks
-sewers, caves and ruins could also house all sorts of hideouts and non-mainstream (as in Daedric) cults
-actually restricting levitation in a city and its immediate vicinity is far more plausible than the entire province heeding prohibition, levitation could still work in dungeons
-city could be partitioned into separate cells to lessen the load
-it would be quite ironic and symbollic to have Mythic Dawn convene in ruined Ayleid shrine under the IC itself
-it would allow sidestepping macguffin being dumped on wussy convict who might have offed emprah and said wuss breaking daedric siege at level 2
I imagine the following MQ structure:
- player witnesses the murder of one or more of emprah's sons, plus learns about conspirashun
- player starts being sought by both the MD and guard (suspected assassin) good reason to open up criminal guild opportunities without them being durr-evil options
- somewhere along the way emprah gets murdered
- somewhere along the way Kvatch gets burned, Martin escapes and arrives by boat still oblivious to who he is, he bumps into the player
- along the way player unearths evidence he needs and new information (including Martin being fucking heir).
- player needs to clean his name, convince a lot of power hungry politicians that Martin is the heir, that there is still threat posed by MD and that it's not in their best interest to attempt to grab the power
- infiltration mission from OB is squeezed somewhere there mostly unchanged
- player may get sent to planes of oblivion, traficking with neutral daedra and agents of other princes would be welcome, also "paradise"
- near the end shit hits the fan and Dagon is roflstomping the IC, player utilizes the means he has secured to thwart the threat, ending may be similar to the original, but with greater participation from the player
- Amulet of Kings may or may not feature in the plot in in any significant way
It would start relatively low-key, but already intense, it would give both player and character motivation to progress the MQ (because having to avoid all the higher class locations with well stocked shops, manors and reputable organizations due to "Halt!Halt!Halt!" with no perspective of just jailtime sucks) it wouldn't feature any of the derpy shit from OB.
From this perspective, it is easy to see where OB and Skyrim failed, narrative-wise. In particular, they both fail to incorporate the early (arguably, the most important and uplifting) part of the Monomyth, as characters are practically begging the main character to be a hero without having to undergo trials or a transformation. Taking the step from being an ordinary person to a hero is practically non-existent; there is no "threshold", so to speak. In Oblivion, the closest thing is the emperor behaving in an irrational manner and deciding to give the hero the amulet of kings against all odds during the tutorial. In Skyrim, it is absorbing the first dragon soul, which leads absolutely everyone to tell you you are dragonborn and must go for some dragon training at Camp Greybeard. From there, it's all a big rollercoaster ride to find the required macguffins and kill the big bad [Mehrunes Dagon/Alduin] and save the day.
Still, Skyrim mostly fails due to pacing, Oblivion just folds onto itself and collapses into a rising pillar of dust and debris.
In Skyrim, the protagonist defeats a dragon on his own (even though you can let the guards kill him, the story assumes you did most of the work), which makes him go from nameless witness of a dragon attack, to hero.
The important part is that you can nom their souls, I think.
It's important to note that in Oblivion you could completely ignore the main quest, just like Skyrim and Morrowind.
The thing is you cannot as it simply makes the entire logic of the gameworld fall apart.
Urgency and do whatever you want whenever you want don't mix.