I assume this is because of technicality reasons, which is FINE if that's the reason and is still being worked on but if it stays like this it will upset quite a lot of players to not be able to at least see each other. But if it's outside the cities, fair enough, however while inside cities that makes me a bit uneasy...
People can argue that the hostilities between each other would break the immersion, but please, the existence of the other race's npcs completely shatters this premise.
I really don't like the idea of being completely separated save for Cyrodiil.