I installed Daggerfall yesterday and am using DaggerXL to play it, yet there are some problems I haven't been able to figure out with a Google search.
Character creation
1. When I want to create a new character nothing occurs when I click on the "custom" option
2. If I click on the question based character creation a picture of a house comes up on the screen, clicking anywhere only comes up with an alert box asking if the character is male of female, clicking either option closes the box but if I click anywhere on the screen again the same question reappears.

General questions
1. Is it possible to loot boxes you see? I have pressed the activate button and scrolled through F1-F4 yet nothing happens.
2. How do you talk to people? My weapon is not drawn and my interact option displays the speech bubble yet when i press the activate button it only brings up my character sheet.
3. What can you steal from?
4. When I try to use the rest option on anything besides "rest until healed" I can not set the time to rest, the screen merely flashes black for a second and then returns to the game.

Thanks in advance for any help!

Just use dosbox.

DaggerXL is far, far from being completed. So most of your problems just stem from parts of the game that aren't in yet. Like Nirreln said, if you want to just play Daggerfall you should use dosbox.

Thanks for the tip.