Thing is that in original Daggerfall everything is already generated by Bethesda, when they were making a game, at least as far as I understand. So, while it was random generation, it's the same for everyone who starts a new game.Essentially my proposal is to have, like in the original game, proceduraly generated environment. For instance for exterior, to buildings be able to be generated or made up by a simple elements, or building blocks, which have textures applied to them.
I do think that at one point, we might create new algorithms to generate new content, but that is far away in the development cycle. What we can focus on now, is starting to replace sprites with 3D models and textures with newer ones, thus improving the look of the game, without changing locations too much.
As we go, we might be able to come up with new ways we can improve the game, but let's start with smaller things we can change now.