Morrowind exists in that narrow space between RPGs and Simulations, which results in some idiosyncratic gameplay mechanics. Melee works fine, but if you're firing a bow, you will have to aim for the hitbox of a moving target AND pass the roll after. So it's skill based and stat based at the same time, not fully satisfying either type of game. Simulation is what Bethesda has always wanted to make, and TES lineage starts from Ultima Underworld rather than from Wizardry or Pool of Radiance. Arena and Daggerfall work as RPGs same as UU, because the graphical fidelity is low enough and interface as well as character movement are clunky enough for the game become an abstraction of "being there". With Morrowind reached the uncanny valley where something begins to feel off. If you take Morrowind as a VIDEOGAME rather than as a CRPG, the complaint that your sword goes right through the enemy like air becomes valid.
Ultimately, I think simulations are bound to diverge from rpgs for good, as evidenced by Bethesda's increasing stripping down of rpg elements. Skyrim is barely an rpg anymore. The problem then with these games is that the trend towards simulation is accompanied by increasing pandering to mass appeal, which makes the new direction very superficial. Environmental interaction, genuinely inventive level design and complex combat mechanics should be the bare minimum requirement. But these things would make the game too hard for the sub 110 IQ player, and so we'll never see a good simulation from Bethesda either.
You're cutting up the chicken in a weird way there - equating CRPG with not-simulation. To me, the whole point of a CRPG
is simulation (of a virtual world and a virtual character). The relevant distinctions seem to me to be:-
1) degrees of abstraction on the one hand, and degrees of direct ("actioney") control of the avatar on the other, and
2) simulation priorities vs. gameplay priorities (i.e. depending on where the balance is in 1), too faithful a simulation might be clunky or tedious gameplay-wise).
I agree with you on the point of there being a divergence though, of a kind. I think it lies with 2) really - the "dumbing down" of games is the gradual removal of simulation elements, and the gradual streamlining of gameplay to suit the "actioney" side of the 1) dichotomy.
It's always been interesting to me that some of the most popular mods for Bethesda games seem to be the "realism" mods - the mods that introduce realism to the weather, to camping, to stamina and encumbrance, etc., etc. There does seem to be a sizeable audience out there (and I include myself) of people who want something like the real world to immerse themselves in (but with magic, s-f elements, whatever) with real world rules that are already ingrained in us and intuitively understood, but just with time and space compressed, and certain elements that would otherwise be tedious or inconvenient to real life somewhat compressed too (some compression of time and space, for example, the ability to save anywhere, maybe a fast travel option, that sort of thing).
With that sort of game, you can have either a lot of abstraction (as in the traditional CRPG) or you can have a good deal of realtime "actioney" control, it doesn't really make that much difference, and it is itself an element of preference. Elements of gameplay that are under the player's direct "twitch" control can easily be accommodated to the more abstracted elements of the gameplay (twitch ability might ensure that you tend to always hit, but an "accuracy" abstraction can make the hit a glance or a crit, that type of thing).
