Since you only have about 200MB of free space for mods, couldn't the .xbe be patched to use say, e:morrowind-cache or f:morrowind-cache as the cache drive/folder, allowing many more mods to be installed? Also, using the E: or F: drive as the morrowind cache folder might allow tribunal/bloodmoon mods to work as you could just copy morrowind.esm to tribunal.esm and bloodmoon.esm (i.e. you would have three copies of the morrowind.esm file that have the filenames morrowind.esm, bloodmoon.esm, and tribunal.esm in the cache directory. That would seem to be alot simpler than other methods proposed, and would allow the game itself to run off of a dvd recordable/rewritable (you would have to extract the game, patch the xbe, then burn it of course).