It's just that it's a removal of depth. It makes things simpler, but the simplicity makes the game less interesting.
In Morrowind, you could have clothes and Armour, stacking stats and bonuses, and making interesting gameplay mechanics. In Oblivion, you couldn't, making some question, why is there even clothing? No-one will wear it, it's a pointless layer of depth.
If you take out all the detail and complexity, you end up with a game that's barely worth playing as an RPG and might as well be a simple hack and slash, fine games on their own, but not what fans want for The Elder Scrolls.
Also, while having more stuff seems like something which will be harder to learn, TES: Morrowind was my first proper RPG, and I learnt quick, and had more fun in the complex and interesting environment with the many options than I did in Oblivion, especially once I realised the auto-leveling in Oblivion effectively prevented my usual Jack of All Trades approach (I rarely make more than 1 whole play through, and only usually will make 2 or 3 characters) and discovered that being competent with blades, destruction and bows, with a decent Sneak skill, as well as developing some Alteration abilities, basically made everything impossible to kill without backpedalling madly on my over levelled Athletics skill to lob fireballs at most everything.
Streamlining is making the menus possible to use and the level paths make sense, whilst "Dumbing Down" is the removal of gameplay simply to make the game simpler.
In this case, you remove the ability to mix and match, and simplify further the choice in armour. This limits play styles and strategic decisions, and may force the player to play in a way they did not intend, and become railroaded.
The only solution that they can do, keeping this system, in my opinion (there may be other, better solutions) is to add in more variety in the kit available to the player.