I think a recent indie game of Starbound has exemplified what in game instruments using the same abc notation files that Lotro has been using can do to improve the game's environment. It's no dead horse, let's not be anti-suggestion here. It's a great addition to a game that I never really hear complaints about from games that have adopted it.
Hell, I'd pay my subscription happily and absence of reluctance if this got in the game. I feel also that the musical lore of elder scrolls online has not been addressed in the manner that it should be, and this is the perfect opportunity that would otherwise be missed.
If an indie, AND another mmo developer decided to add this feature to their game, both receiving a lot of positive feedback from it, then I see little reason why Bethesda shouldn't include it, and yes, I will go ahead and submit to the subscription fee just for this feature.
I'm not saying, emotes that play the same thing, I'm talking about real things that play abc files, the exact same thing in Lotro. If the reader's skeptic gets the best of her/him, and is too afraid that the ability to play any song so long as it has an abc or convertible midi version of it will ruin the Elder Scrolls atmosphere of it, then simply conform the instruments to sound like what instruments should sound in that kind of world...
Then again, I wouldn't imagine Bethesda adding in electric guitars to Tamriel, so I don't see how this fear can manifest. Various kinds of songs get converted to sound like a different genre all the time, a totally electric sounding song that sounds like it was produced in some studio usually has an orchestral version of it, where it obviously sounds like it was played and made by real instruments. Just watch a rendition of any song played by any ancient instrument, and you'll get the idea, it really will have to try hard to start breaking the atmosphere...
I mean, in my view, it's as atmosphere breaking AT MOST as the chat system, no nevermind I take it back, it's even far less than that... If you feel it doesn't enhance it after all.