Hmm, ok - sorry for the double post - I've been looking at your screenshots a bit more carefully. (Though, whatever I say here may well be made less usefull when Megaton does his tutorials that he's threatening).
In reverse order....
Landmarks. You're right to notice that without landmarks the player will get lost. As you're in a forested area, consider some of these as landmarks...
Rivers, waterfalls, large rock outcroppings, a large 'lightning struck' burnt tree, a ruined tower, circling crows, smoke from a fire/house, totem pole, lake/pond, etc
Stupid Tree Walls. To give the illusion of depth beyond your players movable area, create several 'layers' of thin scenery that hides the edges of the world. Think set design (wild west building styles). If you imaging the edge of where the player can go as a solid line - beyond that line, set up some 'one sided' bushes and trees (the player will never see the other sides), beyond those, some lower poly, bigger trees/bushes, and beyond that you can go down to flat tree backgrounds.
Give the impression of depth and the player will never be able to see behind it to the 'cheapness'. Multiple layers of detail.
Linear. Yup - it's hard to avoid being linear.
Have you considered putting in more undulations to your ground? Think about having an area where you go 'over the top' of where you've already been - maybe your path goes underneath a huge fallen tree-trunk or ruined archway, to eventually return to that archway/tree-trunk using it as a bridge over where you've already been.
Consider having a hub area - where several paths lead off. To make it very simple, maybe you need a key for the gate at the end of path 1, but you have to go down path 2 to get it. You've seen this in Fable.
Try alternative paths - maybe one path is more suited to stealthy people, and another path is more likely to be a straight up fight.
I'd have to disagree slightly with the earlier poster - not everyone will stealth if given the opportunity. Many people can't be bothered with stealth and just want to run through, fighting constantly. Your challenge will be to reward the people who do stealth, without punishing those who don't want to. Good luck
