Morroblivion v. 0.64 + unofficial Morroblivion patch.
1. I think creatures fighting with their claws or teeth are imbalanced. My hero is level 20+ now, heavily armored Mage (best trained skills: Conjuration 100; Alchemy around 90; Destruction, Illusion, Heavy Armor, Armorer 50+; Blades, Restoration, Mysticism 40+), a good armor (permanent bound Heavy with Adamantine greaves and Ebony shield), defaut difficulty level. A Kagouti or Alit need 3-4 hits to kill my proud hero (Daedroth only 2-3). Golden Saints, Dremora and hostile NPC's are much easier opponents.
2. I had great problems with the Egg poachers quest for Eydis. When my hero tried to attack the poachers, Kwama workers (also surprisingly dangerous) used to turn hostile and attack my hero. The solution was to run away to a previous cell and kill the one who chased my hero, one after another. The poachers themselves were modreately difficult, finally one of them turned out to be killed by the Kwama workers - they seem to attack the first one who sheathes his weapon.
It is similar when approaching Daedric shrines or bandit caves. If they see the hero, they attack him; if not, they fight among themselves. I guess their aggression level is too high and they do not recognize they are from the same faction. This is why I had not so much work in Valenvaryon (I wanted to buy master Alchemy equipment) - at least one Orc was killed by his colleagues.
S.

I agree about Balancing the
I agree about Balancing the World, I believe Morroblivion should be balanced with Oblivion, ie Armors, Weapons, Creatures. The Kwama Creatures would attack anything that was attacking each other in Original Morrowind. Not really an issue just a nuance I suppose.
The factions, I suspect are a issue with Morroblivion. If anyone has knowledge specifically on Morroblivion Factions? Although I had a quick look and for example, Balmora doesn't have it's own faction, I assume Kwama Warriors do not either, I suspect them fighting each other is causes by they're Faction-less status.
I could possibly look at Faction Overhauls once I complete Balmora's AI Packages