Mesh improvement has nothing to do with that. Grass is generated depending on the landscape of original Morrowind, so mods that would affect the grass would be mods that raise/lower the terrain thus making the grass to float over/be stuck into the ground. So check if you have any of those.
yeah, the thing is, I don't think I do. Here is my mod list -
[Game Files]
GameFile0=Bloodmoon Landscape Overhaul 1.1.esm
GameFile1=Bloodmoon.esm
GameFile2=Morrowind Patch 1.6.5 Beta (BTB Edit).esm
GameFile3=Morrowind.esm
GameFile4=Rise of House Telvanni.esm
GameFile5=Siege at Firemoth Fort.esm
GameFile6=Texture Fix 2.0.esm
GameFile7=Tribunal.esm
GameFile8=Acheron's Camping Gear 2.esp
GameFile9=Adj_Magicka Regen (1.00%).esp
GameFile10=Appropriate Greetings M - T - 1.5.2.esp
GameFile11=AshlanderTent.esp
GameFile12=bcsounds.esp
GameFile13=Better Bodies.esp
GameFile14=Better Clothes Complete (BTB Edit).esp
GameFile15=BTB - Alchemy.esp
GameFile16=BTB - Equipment.esp
GameFile17=BTB - Settings.esp
GameFile18=BTB - Spells.esp
GameFile19=DB_Attack_Mod3.esp
GameFile20=DXM_masterindex_journalfix.esp
GameFile21=horationpcenhanced12-bm.esp
GameFile22=Illuminated Windows - Bloodmoon.esp
GameFile23=Illuminated Windows.esp
GameFile24=Illy's Solsteim Rumour Fix.esp
GameFile25=k_weather (louder sounds).esp
GameFile26=master_index.esp
GameFile27=npce_mwse_patch.esp
GameFile28=Quick Char.esp
GameFile29=Talrivian's State-Based HP Mod v.2.2.esp
GameFile30=UL v2.0 RoHT v1.52 Compatibility.esp
GameFile31=UniqueFinery_NoRobe.esp
GameFile32=Uvirith's Legacy_Final_2.0.esp
GameFile33=Vurt's BC Tree Replacer II.ESP
GameFile34=Vurt's Grazelands Trees.ESP
GameFile35=Passive_Healthy_Wildlife.esp
I can't see anything on there that does what you're describing, especially on such a wide scale as this floating gras problem seems to be - I see it in all regions.
Here is a sample of what it looks like in game -
http://tinypic.com/view.php?pic=2cp9wkw&s=5
I see that on the tops of some hills, in all regions - the grass floating slightly above the ground. Really big immersion killer, so if anyone knows anything about this problem, help would be vastly appreciated.