I personally think this would make it the most amazing game ever made, not that it already isn't . But it would definitely need to implement an "open world" meaning that there are no different zones, and therefore the rendering time would be ridiculous... but still, just imagine...

Basically you mean Skyrim + Red Faction.

Would be great, though.

Exactly.

Perhaps next Elder Scrolls game, (assuming that it will be on another generation of consoles) will have new physics engine that makes this possible even with a game as detailed as the elder scrolls

I wouldn't mind some or even most things being destructible -- being able to say, chop down trees or burn fields of grass, would be highly immersive. I don't think that one should be able to destroy towns/forts, however.

Elsweyr for the xbox 720 in 2014!

It could have been done now anyway. There's a game where physics is incredible, the graphic and detail of everything makes Skyrim still look bad, and not only that, you can go anywhere you want within the world, just like Oblivion and Skyrim. In fact the area size, in perspective, is probably about twice the size of any TES game other than Daggerfall', "Just Cause 2". The story is crap, voice acting and dialogue is horrendous, but the graphics, gameplay and physics are awesome and the world is huge. After playing that game, I always wondered why Dragon Age and now Skyrim couldn't look like that in detail.