I'm writing this thread in order to get all the facts straight for when/if Bethesda take notice.
Personally I don't believe that we will have much trouble as the legal issues were dealt with during the development of Morroblivion.
To Quote the FAQ:
» Wasn't Morroblivion shut down by Bethesda?
Several years ago, at the beginning of the Morroblivion project, the project thread was shut down on the official Bethesda forums, and hosting of it on TES Nexus was taken down at Bethesda's request, due to some apparent licensing issues with using textures from Morrowind in Oblivion.
- Please respect Bethesda's legal concerns and do not post or discuss Morroblivion on the Bethesda official forums, TES Nexus, Planet Elder Scrolls, other similar sites, social networking sites etc.
These legal issues have now been circumvented with mesh and texture replacers, and community development of the project is still going on here at Morroblivion.com.

Yuh, if I recall the issues
Yuh, if I recall the issues were with using the Morrowind mesh/textures, bit this time we haven't used any of it, and we've hand created it.