I recently reinstalled windows, I wiped the entire drive of all previous data before that so I could start fresh. I went to reinstall Morrowind today and it gets stuck at 44% something about data2.cab. I know that it is because of a scratch on the bottom of the disk, It is a deep scratch and goes out towards the edge diagonally from the center. What I am wondering is if there is another way for me to install it, possibly accessing the files on the disk and copying them over? Would it be legal for me to make a copy of the disk for my own use, I have read that although your drive may get stuck at the scratch it may not be the case while burning it.

The EULA allows you to make a copy for "archival purposes". I'd say this qualifies. If that works or not, you could take it to a local gaming store and see if they can buff the scratch out.