Wasn't there a dragon mod for the PC version of oblivion where you could fly around?
Edit: Here
http://betteroblivion.com/dragonmount.php mod works but suffers from slowdown on older machines. Chucking more RAM in your PC helped which should give some idea of the engine's limitations.
As for the invisible barriers - Oblivion has them; travel to the far south of the map below the ruined city of Kvatch. You can see the lands across the river but can't reach them as this is the area where cyrodyll borders with another country. Maps have to be split up to prevent them from becoming too large and causing performance issues - probably why Sentinel Island as not part of the same map as Orobas Fjords.
Possible game engine for Divinity 3 could be the Creation engine which will power Skyrim depending on if Bethesda chooses to licence it or not. Quick look on google looks like the company behind Gamebryo is suffering the typical woes of the industry and is in financial trouble. Another possibility is the Vision Engine 7 which powers Gothic 4.
Some info on the creation engine - just imagine Divinity 3 which looks like this!
http://raidingparty.net/featured/what-the-creation-engine-really-means-for-skyrim
