According to VG247's "very reliable" source, Bethesda Softworks is already three years deep into development on an Elder Scrolls MMO. Recent court documents in the ongoing Bethesda/Interplay lawsuit have allegedly revealed that Bethesda has "close to 100 people working on a secret World of Warcraft-type MMO" -- a tasty piece of info that it's said to be currently fighting to have redacted from a 218-page court transcript.
Furthermore, the unannounced MMO is said to be "very close" to being unveiled. We could even be seeing a release of the purported title later this year, as the transcript is said to also reveal a four-year development cycle (starting in late 2006 would put that either later this year or early 2011). Bethesda has commented in the past that it is currently not working on an MMO, though ZeniMax Online (another studio under Bethesda's parent company, ZeniMax Media) is working on a currently unannounced title. We contacted Bethesda for comment and were told, "We aren't talking about what that studio is working on and don't comment on rumors and speculation."
Source 1 - VG247
Source 2 - Duck and Cover Forums