This is without doubt the best thing that could have happened to this game.
I can understand - at least in an abstract way - the desire for a fully realised open world, but there are very few games that actually take advantage of having an open world, and Game Freak don't have the time, the capacity, or the competence to make an open world work. I mean, the Wild Area from SnS shows this by itself: it's a vast, empty expanse of absolutely bugger all, and people would want an entire game like this? By compartmentalising the world into smaller, more manageable segments, there is less time-wasting to be done. Contrary to popular belief, wandering around and admiring the scenery is not gameplay, it's little better than a glorified walking simulator. You're not interacting with the environment or doing anything meaningful when you're just travelling from one place to the next, and this is a common failure of open world titles: lots, and lots, and LOTS of empty space. Game Freak are already stepping way outside their comfort zone with the gameplay and the new, entirely unnecessary systems like crafting that they're going to be adding, making it open world would be just adding more fuel to the fire.
Monster Hunter Stories was a fantastically realised title in terms of exploration (although the rock-paper-scissors combat and RNG of genes did leave a lot to be desired, in the first game especially) so this is a fantastic model to base the game off of, and whilst I doubt it's within Game Freak's abilities to make it work, they stand a better chance of doing this than going full-on with it, and they would never be able to make an open world as rich as Horizon Zero Dawn.