Okay so it's been a problem well over 7 years that Bethesda still has not fixed, cases where hit sound or ambient sounds are painfully loud and even when volumes are turned down certain sounds remain at maximum^2 volume.
I've tried setting audio to both hardware and software, does not fix. When I tried patching with the Morrowind Code Patch 2.2 which results in Morrowind simply not launching properly at all. The patcher launches but when I hit play, nothing happening to be seen. But when I check task manager, morrowind.exe is in fact running but never actually launches far enough to make the patcher close or to actually present a screen. Yet I can't terminate the morrowind.exe from task manager to try again. But when I launch the backup.morrowind.exe that will launch just fine.