I've been thinking about what I would want in a game, and I realized that one of the things I like most is just walking around game worlds that are well fleshed out (didn't like Oblivion because everything felt the same). And I decided that I would really enjoy a game where you played as a conquistador or something similar, and your only goal would be to explore and map new territory. Of course this would entail action at some points, diplomacy at others, but I think it would be fun to have a game where mostly you just walked around and saw cool and pretty environments, towns, etc. What do you think? Could something like that work, or do most people just want a goal oriented game? Edit: also, are there any games out there similar to this that I just don't know about?

I think it could work but as you touched on it takes a massive amount of effort to make a world big enough for exploration and unique enough for exploration to be rewarding. I haven't played oblivion but in morrowind I did feel that a open world is somewhat undermined if you can't roam freely for long before terrain, dungeons, quests and city's start seeming copypasted.

I gave up on oblivion about a half hour in for that reason. I wanted to play it mostly just to roam around and have fun, but when it became apparent that I'd encounter a dungeon, town, fort, etc. like every 50 feet, it quickly lost its appeal for me.

There are a few games out there that are just exploration games ("Endless Forest" for one). You can also use Second Life as an exploration game, and just wander around looking at the various things people have built.

There is a free version of the server software (called OpenSim) that I have been looking at recently. With this you can make as big a virtual world as you like (up to the limits of the server software and your hardware - but still this is absolutely huge at around 13,107km x 13,107km potential area). Also as OpenSim is highly modable (it is open source) and has a scripting engine available for it, it would be possible to populate the world with procedural content (and even have that content dynamically change while the it is running). It is also capable of handling a large number of clients connected to it (as an MMO).

It is possible to use real world Digital Elevation Models (ground plane height maps) to create the terrain in OpenSim (this is one of the things I was looking at it for and have successfully done). For the Conquistador game, you could obtain the DEM (digital elevation model) of places in South America and actually have the real world terrain for the game (although I am not sure how easy or expensive it would be to get it - I had access to some DEMs for testing).

Using an existing platform, like OpenSim or a similar system and using procedurally generated content could allow a small team to create a vast open world for an exploration game (and as it is procedurally created, there would even be some interesting areas that the developers wouldn't know about).

The in-production MMO Love certainly shares some sentiment with you, though it has a somewhat different focus.