By being confined to a ski resort perched atop a mountain in Park City, Utah, nobody can accuse Bethesda of doing things by halves.

The focus of this elaborate stage is The Elder Scrolls V: Skyrim, a Nordic-inspired title that has now been in development for five years. It comes packaged with heavy expectations from a legion of existing fans, as well as studied indifference from those burned by its predecessor Oblivion – a title that seemed to delight in frustrating newcomers with overambitious gameplay and an unwholesome inattention to bugs.

The Stein Eriksen Lodge forms the perfect backdrop. It's minus five outside, snowing lightly, and at 2500m altitude anything more than energetic typing results in the overwhelming desire to lie down for a spell.

We're assured that the Skyrim Xbox 360 gameplay presented by game director Todd Howard has only been seen by half a dozen people outside Bethesda. It's little wonder, as it offers a frank expose of a work in progress, a game built on the stunning Creation engine that allows the Radiant AI system to flourish. Cue jokes about the Fallout programmers being finally allowed to use the green palette again.

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

The demonstration begins after character creation; a process we're not allowed to witness at this stage. It is confirmed however that there will be ten races, each with their own benefits, although the intent is more to allow the inbuilt levelling system determine how your character is built, rather than any major drive to separate out each player before they've even started.

Walking along a sunlit path next to a river, it's easy to see where the years of development have gone. Despite running on positively old hardware, the world of Skyrim is full of innate detail, each flower and blade of grass being a product of the new Creation engine, rather than middleware such as SpeedTree. A change, Howard assures us, that allows much faster rendering and fluid generation, freeing up development time for other more pressing tasks.

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

Eager to demonstrate one of the most significant changes to gameplay, Howard presses forward along the path switching between spells, swordplay and shields. Each hand can control it's own one-handed weapon or spell, with the corresponding trigger on the controller used to activate it. Moreover, spells can be combined – by equipping spells in each hand and holding both triggers, the spell effect is combined and intensified, the animation moved to the centre of the character's body, and the outcome multiplied accordingly. It's a wonder it's taken so long to implement such a simple concept.

Once again, you can view the world in first-person, or third-person perspective, and it's the former that Howard adopts during the first encounter with an enemy bandit. Using a one-handed shield to parry and smash the enemy whilst strategically swinging a blood-caked sword about reveals a fluid combat system, as well as a multitude of ways to engage each hostile. By pausing the game and switching the shield with a frost damage spell, Howard slows the enemy and delivers a crushing blow. "We're still messing with limb amputation", Howard assures the assembled press. "But it won't be as violent as Fallout 3."

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

A one-handed weapon skill increases by a level, offering a segue to the new interface. With each level gained, a new perk is unlocked, and these are stored in a fantastically detailed tree system represented by star constellations. Perks are ranked and carry with them their own requirements; Howard demonstrates longbow combat by notching an arrow, aiming at an errant bandit and loosing the bowstring – both a zoom function and a time slowdown are introduced. These are separate perks for the bow, and each have their own level of effectiveness.

There are now 18 skills, but only three main attributes – Magicka, Health and Stamina. Gone are Athletics and Acrobatics. It's all part of an overall streamlining introduced to remove unnecessary padding, assures Howard. Moreover, gameplay changes as characters level. It's not a matter of simply introducing more damage to combat, as Bethesda are working to ensure the entire experience becomes more dynamic as your time investment increases. Again, there's no level cap, other than a mathematical one somewhere in the 70's.

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

One of the eight or nine towns that act as quest hubs, Riverwood, is our first introduction to the updated Radiant AI system. By accepting a mission to retrieve a golden claw for Lucan Valerius, resident shopkeep, we're escorted out of town by his sister Camilla. Howard informs us that should Lucan be killed, or otherwise removed from the game for any reason, Camilla would step in to offer the same mission, with new scripted dialogue. It's an example of how the development team aim to process all eventualities, and ensure the story remains internally consistent. As far as dialogue is concerned, none of the jarring inconsistency experienced in Oblivion was obvious, although we'll reserve judgement for a hands-on session down the line.

Adding to the sense of realism, Riverwood's inhabitants perform tasks that contribute to the economy. Mines, lumber yards, smelters and farms all have active operators, although the finer details of how the global economy will function are yet to be fleshed out.

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

Pausing at the outskirts of town to admire the Throat of the World mountain, along with an impressive draw range, a giant stomps past, seemingly happy to ignore us entirely. Another reminder that not all meetings will necessarily result in combat. Just to be on the safe side however, Howard equips a life-detecting spell, highlighting several individuals on the path ahead, then switches to another spell that causes one to attack another. Coupled with our ranged bow and zoom perks, the outcome of this encounter was never seriously in doubt.

As the snow falls, it's on to Bleak Falls Barrow, an ancient Nordic-themed temple used for dragon worship. Appropriately, then, before we can enter a massive dragon swoops overhead and attempts to encounter us. "Sometimes it's best to run away instead of fighting dragons", Howard remarks, before sprinting for the temple entrance. "We'll come back to that guy soon".

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

The close-quarter temple environment allows for stealth and melee combat to be explored. Whilst in stealth mode, an overlay of an eye appears in the middle of the screen to denote your level of detection. Upon encountering enemies, there's a gradual progression between total invisibility, and being completely sprung – shooting a couple of errant bandits in an underground cave results in one crying "I'm sure I heard someone!" before receiving an arrow through the head.

New spells and weapon attributes are introduced – by knocking lamps from the roof, multiple enemies can be immolated. Throw in a touch of chain lightening and they'll all dance, too. Not content with mere area of effect spells, Howard equips Fireball and spams his way through to an encounter with Arvil the Swift, who is currently in possession of the Golden Claw, our mission objective.

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

Arvil may be swift, but he's no match for the perk-equipped longbow. Upon looting his corpse, we secure the Claw, and move forward to a blocked doorway requiring various patterns to be aligned in order to progress. The pictorial answer is on the Claw itself, richly detailed in our 3D inventory view, and with the inner, middle and outer rings aligned, a word wall is revealed containing the dragon shout 'Slow Time'.

There are roughly two dozen shouts scheduled to make an appearance in the game at this stage, each comprised of three words. Each shout can be equipped in a conventional sense, much like a weapon or spell, but can deal out extensive damage over and above what can be expected from traditional attacks. Howard was sketchy on further revealing details, opting instead to venture outside the temple and back to the circling dragon, who certainly showed much less inclination towards privacy.

The Elder Scrolls V: Skyrim Dragonborn DLC screenshots

Despite the admittance from Howard that the character he'd prepared for the demo had massively buffed health and a much larger compliment of spells than would otherwise be expected for a character of this level, the ensuing dragon fight was far from easy. As the creature circled, landed and unleashed torrents of fire, Howard constantly used health spells to remain alive, whilst switching between a number of ranged and melee weapons to finally deal a crushing blow. Defeated, the dragon began to convert to ash, presenting us with the chance to devour his soul – at which point our demonstration abruptly ended.

From what we've been shown, it's too early to know for sure if the final product will meet the lofty expectations of Morrowind, Oblivion and Fallout fans. It'll certainly feel familiar. Skyrim represents a massive investment for Bethesda, and given the extensive scrutiny subjected to Oblivion, it's hard to imagine that it will be anything less than a success.

Skyrim is due 11th November this year for PC, Xbox 360 and PS3. The next big reveal is expected at E3 in approximately seven weeks – we'll be looking out for it then.