I can imagine that at various points of the development, the hardware limitation made a debate on gameplay/mechanincs vs. graphics (i.e., make animal packs larger or raise the animal texture), and due it's casual audience, graphics were placed as priority...
Of course. And better tech will allow them to make those decisions less often, but also it means a higher budget and therefore great profit demand.
Oblivion, though wretched to the core in some ways, was largely a product of it's graphics and technology advances. The impact of more graphical fidelity and voice acting effected city size, NPC numbers, dialogue, number of assets and whatever else. Almost anything you can think of from why Vivec was larger than the Imperial City to a lack of hand placed loot could be explained with limiting the scope and workload in the face of larger graphical demand for time and resources. And then whatever simplifications that cannot be put under that banner could be closely linked to the higher budget and development time necessitating more sales, which means broader audience, etc.
Better and more detailed graphics are the enemy of niche audiences and deep gameplay in almost all cases.