I remember I was able to move Mudcrab into my house in Balmora. I forget the exact details on how I did it. I had posted the exact steps I took on the Xbox forums on the Microsoft site, and Microsoft has since deleted the entire Morrowind forum there. Thanks a lot, Microsoft!
Anyway, I do remember creating custom spells to cast on Mudcrab to make him follow me, and it was a bit of effort to get it all done.