I much rather have Daggerfall in view mode, but it having cursor is too bothersome for me. So is there a way to have a cursor or target in view mode?

Press Esc or whatever to get to the menu. Go to Control and click on the mouse bar in the menu. Ya will see the choice.

I know that, but I want view mode except with a cursor or target.

To get the cursor in view mode, press enter (default key settings)

Aww I thought you had my answer, but sadly that is not what I am talking about. What I mean is I want to aim with the mouse like a normal FPS game with a target/reticle in the center of the screen

Pretty sure Daggerfall does not support that, seeing as it was one of, if not the first fully 3D first person games, you can't blame 'em.

As far as I know, Daggerfall doesn't support reticles. But from my experience, it's not particularly necessary. Most interactive objects are large enough that simply centering them on the screen is enough. For the comparatively rare cases when that's not adequate, just use the cursor mode.

If you absolutely, positively have to have a reticle, you could always take the low-tech approach and affix a small piece of clear tape with a dot to your monitor. That's the best you're going to get until either DaggerXL is released or somebody decides to code game-independent reticles into DOSBox.