I personally had a lot of problems with Skyrim. This mainly stems from the fact that Skyrim was to most everyone else what Oblivion was to me- and by that I mean that it was this fantastic, grand world that was filled with opportunity and was ripe for exploration, with many features I'd never seen blended together so well into a single game. The reason for this was because, for a lot of people, Skyrim was their first Elder Scrolls game, and as a result, by comparison, Oblivion would no doubt seem lackluster for most. This was due in part to Bethesda advertising the game FAR more than they did Oblivion, resulting in things like people thinking that the series was actually called Skyrim, because they didn't know there were other games in the series, definitely not 4 of them.
For me, however, Oblivion was my second ES game, but Oblivion was different enough from Morrowind, my first ES game that I had a lot of fun with but didn't get a chance to delve too much into, that it felt like a breath of fresh air. I loved that game to death, years before I discovered the mods. It was so fascinating and, in a lot of ways, groudbreaking. NPCs lived lives, physics (which, at the time, were mindblowing when incorporated) were pushed, the gameplay was solid, and there was so much to do. Needless to say, when Skyrim was announced years later, I was excited. And as I watched videos, I'd assumed they were just holding a bulk of the content as a surprise, but...
...In a lot of ways, when it was released, I quickly felt like I was playing Oblivion 1.5...or maybe even 1.25. I was pretty interested in things like random events and various other additions, and it wasn't bad by any means, but it seemed like squandered potential. So much more could have been done with it. I mean, Dragons are pretty cool in the sense that they make for cinematic battle sequences and a good number of gameplay aspects of Oblivion were sharpened, but it didn't feel anything like the jump from Morrowind to Oblivion. For most people, this wouldn't really be a problem since, again, most people only learned about Elder Scrolls thanks to the advertising for the game.
Not to mention that a lot of the aspects seem like they were implemented either half-assed or without real impact, such as farming and log cutting, which were originally supposed to drive the game's economy, and marriage, which seems hollow. Heck, I can't even really enjoy the game without my treasure trove of mods, if only because it feels like I'm exploring a paved road. And, on a personal note that can't be taken objectively, I wasn't a big fan of the region of Skyrim. I found Cyrodiil to be beautiful, both for its architecture and for its landscapes, and even though Skyrim had more attention to detail, it's not as vibrant (and purposefully so) as Oblivion or Morrowind. And the Jarl's posture.
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...Not that any of that was really warranted given the question, but I rarely get to really talk about it. That said, in regards to a smaller, more fleshed out region, I'm pretty split. On one hand, the region, its dungeons, and its fine details (as well as its characters) would ultimately be more fleshed out as a result, but one of my greater joys of the ES series that it doesn't really handle too well (probably since it's not built for it) is creating many, many characters and exploring the land, playing in different ways. This generally worked for a while but would only last as long as my patience for retreading plot points, quests, and terrains would hold out because, as stated before, the games aren't built for that kind of play. ES has never been too personal, after all; often putting more emphasis on the action than choice (as well as the player character's development as a fighter and a protagonist rather than being a person in a world living a life, the latter being something I would really like to see them put more emphasis on). Having a smaller region may diminish that, as there's less to explore and more to retread, making for a more detailed game but possibly less replay value. So there'd be a trade-off, though I suppose if they were to make the game more personal or give the player more to do I wouldn't mind.