Once I had to climb the Oblivion Towers I understood why they took flight out of the game. It would have made the Towers easy to beat.
Also, the cities are independant cells to the rest of the map, so if you fly over the walls you fall into nothingness (or perhaps, you fall into oblivion...

). On the other hand, Morrowind cities were part of the overland cell and loaded with them. That said - flight in Morrowind was pretty broken, my wizard (and archer with a magic item of levitate) was untouchable by most enemies since almost no monsters had ranged attacks and the only fliers were just annoying, rather then threatening.