option a
pro's: allows you to build an entirely new world with your own weather, climate, landscape etc.
con's: there are bugs yet to be worked out with worldspaces, and requires multiple 3rd party software. fast travelling into your custom worldspace from a modded navmesh'ed cell will cause a strange elevation glitch where an invisible floor pushes you up hundreds of feet into the sky. multiple cells involving both interior and exteriors that are loaded with goodies will cause instant CTD in between loads on esp's and requires further flaming-hoop jumping (creating a script-travel "purgatory cell" to buffer in between each one)
the latter can be fixed by esm though
option b
you can make a fake exterior in an interior but i believe you cannot fully use weather systems, and obviously no terrain or proper LOD support either, so it would have to be small, as everything would have to be made with statics. you would also have to fake distant terrain somehow (possibly through use of clever fog + forced perspective optical tricks). interiors also seem to have a lower memory budget before hell starts to break loose on scripts and object loading. you also have a significantly lower budget for FX and lighting without the use of roombounds (which in itself is a double edged sword). roombounds are really only useful if you are making a typical linear dungeon. they are practically useless for open layouts
option c
floating cities gives you the advantage of building within the tamriel worldspace, but you have all the usual problems such as large statics not loading properly from distance. navmeshing could possibly become problematic depending on where you build (i would suggest picking as remote a location as possible, preferably uninhabited)
i would personally go with option a (as i am currently doing now). even though this option has the most potential problems, i think the trade-off is worth it and there are viable workarounds for most of the issues.