I just got this mod.

Am I right in that to install it I need to simply extract all files, then place the file in the 'data files' folder In morrowind folder in my program files?

FPS optimizer is not a mod; it is a program. To use it you run it then while it's running load Morrowind. The window for fpso will have a launch button to start morrowind & mwge/mwse

More or less, it doesn't matter where you put the files.