Alright, time to lay the rumors and conjecture to rest.
The Steam version of MW is recognized by MCP and fully patchable by that tool - MCP v1.6 or better is recommended tho.
MGE works fine with the Steam version of MW after making two simple adjustments:
* steam's 'Enable Steam Community In-Game' setting must be disabled in order for MGE to run in-game.
* the bsa files need to be redated in order to properly use distantland (this needs to be done even without MGE in order to get bookart/icon/mesh/texture replacers to work).
MWSE works fine with the Steam version - either MGE's built-in version or a stand alone version.
FPS Optimizer works fine along with the Steam version, even while running with MGE and/or MWSE.
The Steam version will always start up Steam and take the user thru the Morrowind Launcher first regardless of running directly from Morrowind.exe or running MW from the Steam menu - as long as the Steam version is installed properly, 3rd party apps will still work correctly despite this.
Adding plugins is accomplished by installing them to the '...\SteamApps\common\morrowind' folder (subfolder structure below that is the same as non-digital MW installs). That's also where you'll find the exe and ini.
And thanks showler for giving the heads-up about Steam offering MW GOTY for $4.99! That was the price point I was waiting for, and afforded my ability to confirm this first-hand. :thumbsup: