Probably because they would look horrible unless they had physics, and with a game the scale of Skyrim, that would be impossible on consoles at this time.
I now Skyrim pushes the limit on consoles, but what about other games in an open-world setting (like the ones previously mentioned: RDR, AC, DD ++). From what I have seen from the modded capes it doesn't look like there is much texture flow there either. Is it the engine Beth uses?