I too like the idea but am unsure how doable it really is. I think that with tech advances the levels of higher fidelity achieved feeds the expectation of just that being the norm. I doubt the kind of highly varied and interesting to the player content can be done by generation. I'd be happy for that to wrong tho. A while ago when I played a lot of MW one of my dream game ideas was hand crafted locations in a client generated world - the game has x towns, y villages and z dungeons, all hand crafted which don't change much and that are linked by the story. Each time you start however you can gen the world space around and in between those locations. Haven't thought about that for a long time.
Daggerfall is ok, the ambition is laudable. I too vividly recall seeing the box - I remember thinking it looked kind of weird. I don't remember exactly why I didn't get it, I don't thing it ever really dawned on me that it was perhaps the kind of 3D rpg-adventure I'd often thought about. I was much more into simulations and shooters back then though.