Pluto, what does merge levelled list mean?
Different mods that change Leveled Lists (how items/creatures are encountered as you gain levels) need to be merged, or you wil encounter things not met for your level.
http://www.mwmythicmods.com/starting.htm#basic has a good description of how they affect the game.
The easiest way to do this is using TESTool to "Merge Levelled Lists for Active Plug-ins." You'll also want to make sure the Merged.esp loads last in your Load Order, or near last in some cases, for it to function correctly.
Need more info on tools you need for Morowind, check http://www.gamesas.com/topic/1305729-mod-recommendations-for-new-players/ it has a section on recommended tools you'll need.