As the title says, the item known as the "wizard's staff" should allow the user to levitate. However, it still uses the old form of Morroblivion levitation, whereby you would need to "key in TCL to levitate" into the command console.
While the staff still says it applies a spell known as "wizards flight" (seen in the images below) it still asks you to key in TCL.
I found this staff in the Ramimilk Shrine. However, according to UESP there are four more staff's scattered across in different locations. One is needed to complete the "a wizards staff" quest. http://www.uesp.net/wiki/Morrowind:Wizard%27s_Staff#Wizard.2...
I am currently using Morroblivion V55
The staff applying the Wizards Flight spell (it doesn't actually apply the spell):
The prompt to imput the TCL command to levitate: