Daggerfall... towns, dungeons, exploring, adventuring. That was the crux of it. It was like a world you could get lost in.
I remember Rosthara (?) talking about town generators, but that was a long time ago.
The problem with dreamy projects is the goals themselves become dreamy. Expecting a ludicrously high level of quality for models, for visuals etc. Immersive worlds are not always made from things that look beautiful. Daggerfall was not beautiful. MUDs are not beautiful.
If you want to get back to that essence of Daggerfall, you need goals that lend itself to that. Forget about setting, backdrop, etc. Let that come over time. You need a dungeon to explore, that is randomly generated. A town to walk around, that is randomly generated. People to interact with, that are randomly generated. A world map that is randomly generated.
These are not difficult tasks. The towns in daggerfall were just blocks fitted together. The dungeons a set of corridors and rooms of set shapes that were linked together (and there's plenty of dungeon generating algorithms
online - start with something 2d, then wedge a few of those together, and bam you have a random 3d dungeon generator). The world was a 2D grid with randomly placed coordinates for dungeons, towns - it isn't hard stuff. A motivated programmer could have those 3 things put together in a few days. Assorted blocks, 2d dungeon generator hacked to be 3d, random coordinates on a map. Generating a basic 3d world around that shouldn't take much longer. Again, keep it basic, throw out shaders. Heightmap generators are common online as well.
It doesn't matter if all the people look the same, or the creatures are just boxes with the name "Wolf", "Skeleton", etc on the side. It doesn't matter if the dungeon is all grey and brown and made of big cuboid blocky rooms. Once you have a working dungeon generator, you can then evolve the rooms, add the greebles etc. At the moment you just have this static basic world, which is exactly what Daggerfall was not.
Back to basics... what was it that made Daggerfall good? It wasn't the graphics, or the story. It was the adventure. Build the adventure, and then build everything else around it.
Look at what Gladius is doing with the old demo, bringing models into it, improving the textures. If you can provide a framework, a basic functioning world to adventure around, it won't matter if it looks crap because the Gladius' of the world can change that for you. But if there isn't a world to improve? The game is dead in the water.
And no, you shouldn't expect the game to be anything. Be at peace with it failing. It doesn't matter if it has failed or will fail. You do this for fun, not because you are expected to produce Eldar Scrolls VI.
I'll also add that if you think Panda3D is better, garvek, go with that. Forget what I said before. Just try and attach a purpose to what you are doing. (There didn't seem to be much purpose in the engine juggling over the years, other than lack of familiarity.)