Yes especially in games like the Elder Scrolls and Fallout. You would have to break immersion one way or another to convey this information and quest markers the the most streamlined and modern method.
The change from no quest markers to quest marker came paired with a very important new immersion feature in both games and that was full voice acting.
The reason the old system worked in Morrowind (forgetting the old Fallouts which were not open world games) was because you could ask just about any npc about a quest to get information. Each npc pulled from the same dialogue libraries and since the lines weren't voiced that worked.
Otherwise to do the same in a fully voice game is that it would exponentially increase the amount of voice work required and also lead to an even greater spread of the same voice lines between npcs which would break all the immersion voicing them brings.
Also not having then tends to do some annoying and immersion breaking behaviors. You do dumb things like reading dialogue logs and shifting through menus and reading quest journals. Stopping the gameplay to menu through text is not really anymore immersive than being able to continue the action but having a small piece of UI that gives the same info.
If you are very concerned about losing the act of looking around an environment to pixel hunt for stuff. You could always do one of those arrive at the area and show the circle over the area you need to look. Those are literally no difference in experience than having an npc say look in the purple house in the west side of town for the knife.
TL;DR Both methods break immersion in their own ways. I much prefer the one that allows devs to employ modern features all other genres have and values your time and gameplay experience.
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