Auto leveling is what ruined oblivian for me, i could not tell you the hours i had in morrowind but i didnt even finish oblivian. there was no point in leveling up at all because it was just as hard at level 1 as at level 30. the npc's should all be set at whatever level and stay there. and as u get stronger and better u will be able to take them on just like in morrowind.
i loved morrowind. the dwarven ruins were awesome, the best weapons and armor were hidden all over the island, and the story was just plain better. my 2cents