I activated the exe just as the directions said. I confirmed that I had Morrowind and Oblivion. When I clicked install it included this in the pop up
"Could not find part of the path to C:\Documents and Settings\stefanr\My Documents\My Games\Oblivion\Data\Morrowind_
ob.esm" I don't know what's wrong. What should I do?

That's a program bug. I've
That's a program bug. I've seen it before when there are space characters in the path statement. Try enclosing the path in double-quotes .. like this:
"C:\Documents and Settings\stefanr\My Documents\My Games\Oblivion\Data\Morrowind_"
edit:
Why did you install morrowind in your 'My Documents' folder? It should be in 'Program files\Bethsoft\Morrowind\' or (in my case) 'c:\morrowind\'. If you really installed in MyDocuments, the Double-quotes may work. If not, use the real path to morrowind.