So I download daggerfall from the bethesda website, then I get dos box so its says d:\DAGGER> then I type in fall.exe z.cfg and it says illegal command fall.exe. Then When people says change the z.cfg I search all my daggerfall files and cant find z.cfg. Trying to fix it myself hasn't worked a bit, I've looked on the forums and still have no idea. I know its a zipped file so should I download in dosbox or extract files? But I think my main problem is that I can't find z.cfg. I'm dieing to play because I feel like I'm going to die if I try to play 16-bit arena again.

You need to install the game first. http://www.gamesas.com/bgsforums/index.php?showtopic=479044&st=0&p=6877868&#entry6877868 thread has some good instructions. If you use the search feature here you'll find a few alternate installation instructions as well.