I checked - the arrows are equipped and not broken, the bow is equipped and not broken.
What am I missing here?
Can you see the bow in your field-of-view? I just tested a bow in Daggerfall and I have no problem firing it by using the right mouse button. Have you changed your keyboard controls at all? Some people report that re-assigning their attack buttons causes problems.
Problem solved. That was the issue. Changing attack to M1 breaks archery. I reset them to defaults, then changed them as needed, keeping M2 for attack, and now arrows work splendidly.