The cities are smaller in order to fit them all within a single cell. This is properbly the main reason for their size.
I was very disapointed that there are no large cities, but Im sure modders will fix it.
I think the reason's Morrowind's feel better is that they are more intergrated into the landscape, nearly all the cities in Skyrim have specific "This is city zone", "this is wilderness zone" around them, where as if you look at Morrowind's they seem very intergrated into their surroundings.
Morrowind's cities aren't "great ot see from a distance" because when released, Morrowind couldn't render distance....comparing Morrowind and SKyrim on graphics is simply unfair.
EDIT: As a modder I myself fell into this trap.
Many of Skyrim's cities are 'flat', they have been built in an area, only the entire city is all 'one level' and rather boring.....the best cities in all the game have been the ones where you could travel upwards/downwards aswell as across the city.