There has been some bug fixes and improvements lately for Morrowind.
emissive material color and alpha support
Ghostgate is now transparent and glowing. This might have a good impact on trees too. But at least Liztail is working on distant land improvements, he may add fixes for the lighting issues. I can confirm the brightness is fixed now.
_dist flag
You can flag certain nif files with this and they will appear in distant land instead.
x_tree_01.nif
x_tree_01_dist.nif
MGE will only process x_tree_01_dist.nif, so you can make LOD versions, and fix colors and such. Morrowind will use the first.
MGE development is on fire!!!
Edit: I don't think billboarding would be that hard, in vertex shaders it can be done. I think the problem is more about little customizations and distinguishing tree and leaves. (Somebody suggested using grass mods for leaves, that could have actually worked.
Now that I think, something can be done so after some certain height(If it would be possible to determine the ground height in the shader), the animation can be changed into proper leaf animations.)