One of the things The Elder Scroll titles is that they have an absolutely HUGE game world in terms of expanse; however, most of this is algorithmically generated, and therefore lacking in depth.
If my understanding of how character development in these games works (I haven't played them, but I've seen some friends who have), it is mostly through accomplishing various tasks for certain people; after you do enough to please the leader of the theives' guild, you are essentially a thief; on the wrong side of the law, have contacts that can get you otherwise unattainable equipment, etc.
If I am correct in my assumptions, part of the depth of character development in these games derives from the expanse of the world and therefore the algorithmic nature of the Elder Scrolls engine. All characters you talk to, buildings you enter, and even city layouts, are algorithmically derived.
Unless Dee has added this to CGE without telling anybody, CGE will not have algorithmic tools for generating your universe. While you can make large gaming worlds, you will need to do a lot of the setup by hand.
As for the ability to let the players gather herbs, cut lumber, etc., yes, most of this should be do-able, provided you implement them in your game. In Ambrosia's Cythera you can use items on other items to make new items, such as bread. I'm fairly certain you can do this sort of thing; When one item is used with another item, an event can be called that replaces one or both of those items with a new one. Of course, you'll have to set the properties for that new item up.
As for letting the player create spells, well, I think that the CGE would require some more powerful internal engine-specific scripting before something like that could be done. Spells, like items are tied into various event calls, which means that a spell is defined to do certain things; play an animation or sound, teleport the player, blow away thine foes, heal you, etc. I believe a more powerful implementation of scripting the internal parts of the engine would need to be implemented for such event handlers to be created on the fly by a player.
But... much has changed in the engine since the last time the beta team has gotten a chance to tinker with it. We shall see how it has grown.
------------------
People who claim the sky is falling obviously aren't aware the earth is falling, too.
