Dave, you kick the game too easily. The issues you describe are kind of unusual. The guy who killed the taxman, ok ... he has a very high hand-to-hand fighting skill, I mostly do not kill him before my mage reaches a level with a "sudden death" fire or poison spell. Morrowind is just not this kind of hack and slay thing of the Diablo caliber, where you can beat everything with a low level character. You need to train a lot, you do not have to fight at the beginning, there are a lot of peaceful quests to do for a new character...
But like said, you have to love it or you hate it. Just a hint if you (unlikely but...) give it another try: there is a difficulty slider from -100 up to +100 at one of the option windows. "Minus" 100 seems to be your friend
