I'm not interested in the project but I think it's easier to answer all this stuff by asking a different question:
Would it be possible to turn the DFU framework into a more general game engine that can load data other than Daggerfall?
My answer would be a resounding yes but it's a fucktonne of work.
By creating a separate fork of DFU and changing where certain information is read from, you can change the world completely. At the very least, this would be the terrain, climate, location and political data. If you were to create a new data set for each of those components you would get a 'new' world with an unusable travelmap since that is completely made out of bitmaps so that's another part that should be replaced.
So far you'd need:
8-bit heightmaps (one small version that depicts single map pixels (DFs is 1000x500 pixels) and another larger version that is 5 times larger to provide the noise detail within a map pixel).
1 climate map (which needs to be one pixel wider than the small heightmap so if the heightmap is 1000x500 pixels, the climate map would be 1001x500 pixels).
1 political map (this determines which faction controls what region)
A new data set for locations
A new or altered data set for political data
A new travelmap (either implemented in Daggerfall's fashion or something completely different, that doesn't matter)
You'd also have to remove all static references to Daggerfall's world size and make the size in code adhere to your map's size.
At this point you'd have a new world with custom terrain, political factions, locations, climates and a travelmap. The locations themselves would all feel very much like a carbon-copy of Daggerfall.
The location layouts are made with RMB blocks, those blocks would have to be remade or new ones would have to be added to get rid of the carbon copy feel layout-wise. This would be helped along greatly with new models, sprites and textures. The same goes for the dungeon exterior and interiors.
All the NPCs are still named like the Daggerfall NPCs so if that's a problem, that would have to be addressed too.
With that stuff out of the way, you'd still need new quests unless carbon-copy stopped being an issue at this point
I'm not even going to touch on spells, game texts etc. but safe to say the gameplay rabbit hole is quite deep.