A mile wide and an inch deep
Despite its horrific bugs, I found Daggerfall to be the most enjoyable of the bunch. In my mind, Morrowind and Oblivion are a step back from Daggerfall in terms of RPG gameplay.
That said, the improvements in Oblivion coming from Morrowind are immediately apparent:
1) Pretty. Every graphics whore should be in Heaven. Can't complain about the graphics. Nice implementation of HDR.
2) New combat system. The ability to block and execute special moves in 1st person makes combat more involved and varied, rather than the simple click and random roll of Morrowind. As your character becomes more powerful, however, the game tends to reduce to a clickfest again as blocking and strategy go by the wayside.
On the other hand:
1) The new monster scaling system. Just awful. A huge portion of fun in RPGs is found in building up your character to overcome previously impossible challenges, turning the tables on enemies that once wiped the floor with you, gaining access to new areas, and carefully selecting skills and abilities that you'll need to progress through the game. In this game, it's actually possible to complete the game at level 1 (and with great ease), completely doing away with that whole aspect. That's just wrong. There are some mods out that will fix this disgrace, but the devs should've left this concept on the cutting room floor.
2) Disappointing AI. Forget about Radiant AI. This isn't even going to cut it in most FPSs. Characters getting caught on each other/walls/ledges. Allies jumping into lava pits to chase down monsters. Attack a guard and watch the entire town come to your defense after the guard strikes back, creating a laughable brawl between the guards and citizenry. Killing a person right in front of others and getting no reaction. Lots of silliness. Well, you say NPCs now have sleep/work/eat cycles. So did Gothic 5 years ago, and Ultima 5 back in 1986.
3) Sound. Pretty much there's only one voice for each race - the Nords and Orcs share the same voice. Needless to say, everyone sounds the same. Adding sound to the dialogue also meant that the devs had to cut back on the depth of conversation and number of responses, generally limited to a choice of yes or no.
4) Questing/Main Plot. More or less the same as Morrowind, with slightly less depth. The main plot is riveting - not. There was never any sense of urgency or consequences for not acting within a limited amount of time. Plot-centric characters can't die, just fall unconscious. Some of the guild quests are more interesting and not entirely the point A to B, kill C affair. Sadly, I became so bored with combat, many of my Oblivion Gate ventures turned into beeline sprints to the Sigil Stones, constantly invisible. Mazoga the Orc was the closest I came to finding an interesting character, and that isn't saying much.
5) Game-breaking spells/enchantments. 100+% Chameleon enchantments for example, among many others. Glaring exploits like this should have been weeded out long ago. I like to push most games to their limits and achieve the best combination of items/skills possible, but I found myself holding back in Oblivion, because it's not too difficult to completely break the game if you play that way. Raising the difficulty slider above 80% only draws the length of fights out - not particularly desirable as combat becomes tedious.
If your thing is mostly FPSs, you'll probably get a hell of a ride out of it, because it's essentially an FPS with swords and magic. This game was designed with the mainstream in mind, and they seem to have hit the mark rather squarely. If you're a hardcore RPG'er who really goes for characters, story and involved character development, you're probably going to have a similar reaction to mine. Hopefully Gothic 3 will fit the bill.