Hence why I said "let alone the engine handling it". Of course I was referring to the entire continent as one world space which is what everyone expects.
I would love it if a seamless transition between world spaces could be achieved and if and when it is all our problems(except the development scale feasibility) would be solved.
Even so the reasons you quoted for it not being feasible are inaccurate.
You said that people would run out of video memory or system memory.
That's not going to happen, because only the items in the immediate viewable area are loaded into video memory at any given time, and the same goes for memory. The entire playable world is not loaded into memory, video or otherwise, the minute you step outside from an interior cell.
Everything beyond a certain distance consists of increasingly smaller and smaller textures and lower resolution models. Even the landscape itself.
And this assumes infinite viewing distance not occluded by objects or terrain, which obviously isn't going to happen.
As it is currently there's a couple points in Skyrim where you can get high enough to see probably about 1/3 of tamriel rendered, in low detail, granted, but that low detail will stay at that distance, regardless of whether or not higher detail was available or not. The higher detail will only load in once you're within a few cells.