Arcanum and Morrowind were the best RPGs of my early teens.
Will there ever be something to surpass them? Or are we doomed to live in a world where such greatness will never be seen again?
I'm going to try to engage with your thesis with all the solemnity and seriousness it deserves.
I played Arcanum this winter. I've played and finished it several times before, but this winter I got really annoyed with the game. I made it as far as Stillwater, before giving up.
The fatal flaw of Arcanum is the forced sequence of order: you have to do the Black Mountain Clan dungeon, you have to do the Isle of Despair, you have to do the whatever dwarf clan (two forced dwarf dungeons is asking a bit much from the player), before you can unlock certain regions of the world. And Black Mountain Clan is a badly designed dungeon, that isn't with enjoyable anything but melee characters.
But you can cast charm animal or invent the distracting smell and just run through it, someone says... yeah, still bad.
It would be a better game if the world was open from the start, if you could go already to Caladon from the beginning. But no, you have to invest 15-20 hours before you get to do that. And this time, the fatal flaw killed the game for me.
I do love my intelligent half-orcs, whether magic users or technologists. Half-orcs have to be careful who they mouth off or who they approach. Their second class citizen status is constantly reminded to them. It gives a good character motivation to pursue power. On the other hand, the reactions are mostly related to appearance, and if you magically enhance your beauty, everyone will be polite. That means, that you can easily get around this negative reaction. Still, it's my favorite character archetype to play.
It is true that more games should learn that aspect of Arcanum, givings you rich character creation options and acknowledging them in in-game. Learn from it and make it better.
It would be nice if there was another game like Arcanum, it's setting, it's music, it's character creation and building options. Don't have to make it Arcanum 2. Make a smaller game in the Arcanum world, set in Tarant. Or make your own industrial London inspired setting.
Regarding Morrowind: I don't really buy into the Morrowind vs Oblivion/Skyrim dichotomy. As if one was made by design gods and the others by nincompoops. Many of the flaws of those games are in Morrowind, and some more. Skyrim delivers a more reactive and fun gameworld than Morrowind.
Better writing too (as in in-game characters). Morrowind dialogues are literally a wiki page information dump. The world is interesting, but there is no one interesting living in it. Even Vivec is more interesting as a concept, as the weird character from the lore, rather than an actual in-game character.
There is however something intellectual and literary in Morrowind, that the future Elder Scrolls games not possess. The worldbuilding and lore are obviously created by well-read intelligent people, but also the visual imagery, the set-up, the things you do in-game... the endgame content is literally a descent into the deepest circles of Hell. Never mind the lore, visually and metaphorically you are actually going to Hell. The game manages to create these evocative mythical moments that neither Oblivion or Skyrim managed too.