Is it possible? I know with morrowind, I packed a bunch of mods together burnt them onto a disc and POW, morrowind with better heads, better bodies, graphics overhaul, and all kinds of nifty stuff on my xbox.
And I know, PC is superior, but this could potentially turn on a whole new crowd to morrowblivion. I don't fully understand why morrowind and oblivion need to be installed for it to work on pc. So if I could get some advice I'd greatly appreciate it :)

To try to answer your last
To try to answer your last question first,morrowind and it`s addons Tribunal & Bloodmoon have to be installed as the morroblivion installer checks for them for copyright reasons.
The same applys to Oblvion & Shivering Isles,but obviously Oblivion needs to be installed because morroblivion is an Oblivion mod.
I do not think that would work for the xbox,but others might know better.