By now I expect this news story has become common knowledge. Provided it isn't an MMO, I'm totally stoked. I've put about a solid week's worth of hours into Oblivion and roughly the same into Morrowind. In my eyes, Oblivion was a damned masterpiece. But there are a TON of things to improve upon.
Things that need improvement:
1. Good Story
Oblivion's story was objectively terrible. Everyone accepts that. It was the usual, cut-and-dry, every cliche in the book fantasy tale. If Bethesda was smart about this, they would bring over the writers from Obsidian to write a decent goddam story for once.
2. New engine, or seriously overhaul the current one
Gamebryo is buggy, and is getting buggier. Look at New Vegas. But even back with Oblivion, there were a myriad of problems and glitches (floating paintbrushes, anyone?). While some of those bugs were hell of fun, it's probably time to either switch to a fancy new engine or overhaul the shit out of Gamebryo. It's 2010, Bethesda!
3. Mounted Combat
This was a big pain in the ass in Oblivion: you're riding through the forest, and suddenly a bear jumps you. In order to fight the bear, you have to get off your horse. Whilst you're fighting the bear, god knows where your stupid animal decided to run off to. What's the point of being able to use bows and shoot fireballs from your fingers when you can't do it from a horse? Aren't you supposed to be some sort of badass savior of the realm? I can one-hit demons, but I can't shoot an arrow when I'm sitting on a horse. Something needs to be done.
4. Gimme dat old Morrowind flava...
There were a lot of improvements over Morrowind in Oblivion, but there were also some not-so-great changes, too. Because Cyrodiil is landlocked, there is no flight. There are no werewolves outside of mods. There is barely any difference in terrain across the entire province. There is no interplay between the various factions. The list goes on and on.
5. Balance, balance, balance
Yes, Oblivion is a single-player game. And yes, it is unbalanced as fuck. Invisibility alone completely breaks the concept of stealth. What's the point in having a security skill when there is an easily obtainable item (Skeleton Key) that renders it completely worthless? Why are the guards psychic? Come on...
6. NO Oblivion Gates/Equivalents
This was a TERRIBLE idea, and the main reason I've never completely finished the main quest. It's fun the first two to three times, but then...urg. For a game with so much variety elsewhere, having your main story be a bunch of stupid dungeon runs is really, really bad for business. Don't do it again. I don't want to pop in Elder Scrolls V and be told that I have to go into 50 identical dungeons to find 50 identical pieces of gemstone to save the universe. I'd rather let the universe die.
7. More Varieties of Dungeon
The dungeons of Oblivion are fairly fun. There's cool loot, creatures to fight and chests to open. Unfortunately, about 80% of their layouts and interior design are identical. Take all the time you need, Bethesda, but just give me some different textures than Int. Gloomy Dungeon and Int. Gloomy Mine.
8. Nicer Looking People
I don't want Guild Wars-style "Everyone's a fucking supermodel!" but I don't want World's Ugliest Humans either, which is what Oblivion gave us. Find a nice middle ground, if you please.
*NOTE*: I am aware that there are mods for Oblivion that fix a number of these issues, but that's not the same as having the developer be smart about it to begin with.