Mods for Morrowind are generally ported from PC versions, which are created with the TES Construction Kit that ships with the PC media. It's possible to use a tool called the Morrowind Enchanted Editor to create mods, but that's a third party tool that doesn't allow complex cell editing or relational links. Also, neither tool includes applications for creating 3D models or graphical textures.
If you like Morrowind enough to want to create mods, then the thing to do is to buy the PC version of the Game of the Year release. You can find this for $20 at Target or any computer software place. Stay away from Electronics Boutique or Wal-Mart, since they're likely to sell you damaged or used product and claim that it's new.
-KKC, who bought a PC strictly to play and mod Morrowind with.