Defining quad and cell:
Imagine the game as a 2 dimensional map, looking down on top of the map there is an x,y grid. http://www.instructables.com/image/FK077AIFR12319A/X-Y-Axis-Graph.jpg
Look at the X axis (east to west in the game) and keep this in mind.
Now look at how the game is set up:
The game is made of cells and quads that define the playable space. This image explains what a game cell is and how they work in a 2d image http://cs.elderscrolls.com/images/8/80/Overviewgrid.jpg
So looking down onto an Oblivion or Skyrim map as a piece of graph paper we get this: http://cs.elderscrolls.com/index.php/Oblivion_Units
So there we have cells, quads and the game axis. Here is the Mesogea map and the Skyrim map as that grid in comparison:
http://mesogea.spruz.com/user/380826/members/A7EDA3B7-F0E8-43D9-86CE-5576CA91B0E6/big_201220807012148.jpg
You can see that Skyrim is built within a 4x4 quad range, that is 128x128 cells approx. Mesogea is considerably bigger, as is the Middle Earth Role Playing map and other extended worldspaces. In order to go much beyond Skyrim in a meaningful way, that is encompassing other regions of Tamriel would require a map beyond the 128x128 cell range.
Defining the problem:
Watch this Youtube video and see how the horses react. These creatures are placed on the cusp of the 128 cell grid. As the horse walks from cell 64 into cell 65 the problem occurs: http://www.youtube.com/watch?v=qndePb5jEO4&feature=youtu.be
Recall our speaking about the X,Y axis? and that the X axis is east to west (or vice versa). This issue ONLY occurs when going beyond cell 64 east and cell 64 west (ie: -64 on the X axis from the centre of the game world point 0,0 and +64 on the X axis from point 0,0 again).
Defining this area by map we can see on the Middle Earth map made up of an ingame heightmap showing the QUADS layout;
http://img13.imageshack.us/img13/8141/problemarea.png
The area in RED is affected by the bug. The area in BLUE is workable, as in there is no issue as highlighted in the video.
As you can see this is not an inconsiderable area.
Comparing this with Oblivion:
Oblivion provided a 16x16 quad workable area. Imagine the Middle Earth map above with no red area, that is what Oblivion provides for. This bug appears unique to Skyrim.
Bethesda and fixing it:
We received a reply from Gstaff who represents Bethesda as a collective here on the forum. They state that the problem is with HAVOK and is not going to be fixed by Bethesda. We can debate the validity of this elsewhere.
Please try to keep to the following in this thread:
What this thread is for:
1. Coming up with ideas to overcome the bug.
2. Posting results of tests
3. Addressing Havok and CK issues to try to resolve the bug
What this thread is not for:
1. Arguing the merits of large worlds
2. Arguing the merits of the thread being here (if you dont like it, make your own elsewhere)
3. Having a dig at each other, complaining about Bethesda (whether we think it thoroughly deserve or not)
4. Trying to force Bethesda to do something about it. (whether we think they should or not)
I am not a moderator, and I am quite guilty of sometimes going off thread, banging on about a subject, getting annoyed and hot under the collar. I will try not to. If we end up with the usual slanging match I will ask a moderator to kindly cull anything that isnt focussed on resolving this bug and would ask others to do the same, even if its me banging on again

I would really appreciate it if one of the moderators, preferably someone with an interest in this particular subject to drop in now and again and do a bit of policing the comments to keep it on track, from the usual unbias perspective.
So lets see what we can do: