Here is my advice to you second:
If you get the game to load with a mod active, and everything is working fine and out of no where you get a DDE...Then that usually means that the x-box can't handle the mod (I usually try the mod 2 times before giving up on it just to be sure)...This has held true with every single mod I've had that happen with.
Also I have to ask:
When you hex edited the Morrowind.xbe file, did you edit the following:
the 1st, 3rd, 5th, 6th, and 7th Z
If not you may want to.
I know my tutorial only has 4 Z's mentioned to edit but there are actually 5 that need to be edited
That way if what I described above still happens, then you'll know 100% for sure that the mod can't work on the x-box.
Because from what I understand, the 6th Z effects the textures.
Try that and let us know what happens
