Ok first off sneaking is pretty broken for me, NPC's can detect me from other rooms, theres no sense of cover while sneaking, I can be behind a soilid wall and an npc downstairs on the other side of the building detects me. Its also the same with hostile NPC's. The second your within range of there sight they attack, you dont even get a chance to sneak attack them.
Another bug is all armor and wepons have the same properties they only vary slightly by what type of wepon or armor it is, but there are no upgrades, upgrades of previous armor and weapon types are the exact same of the predecessor (except the weight difference)
http://www.uesp.net/wiki/Morrowind:Combat
http://www.uesp.net/wiki/Morrowind:Base_Armor
http://www.uesp.net/wiki/Morrowind:Base_Weapons

#2
Looks like your skills are low