I dont know how far along it could possibly be, Morrowind is only 2 years old and they have been making plugins and expansions during that time. I guess its possible they had another team working on TES4 though.
BTW, anyone hear that Bethesda picked up Call of Cthulhu? Itl be available 1st Quarter of 2005! Been looking forward to that game for a long time, im glad they finally got a publisher