Quick question: Is it possible to make items in an NPC's inventory (specifically, clothing) invisible to the player? Failing that, could they be scripted to be non-lootable?

No, the non-lootable flag was an invention for Oblivion, in attempts to nerf the game by not letting you pick up things you can clearly see. Morrowind allows you to pick up items.

You can remove all instances of an item from the player, which makes it very difficult for them to loot. That's reasonably simple.
You can put a script on items to not allow them to be picked up, which will work if they're in the world, but not in another inventory.
You can force the player to drop items whenever they're added to the player's inventory.

You could also make an OnDeath script for the NPC in question and remove all the items from that NPC I guess.....

Simon Griffiths, "Specifically, clothing"?

If NPC is wearing the clothes when alive, you could try disabling looting when dead, something like this

begin noLootScriptif ( OnActivate )	if ( GetHealthGetRatio > 0.04 )		activate	endifendifend

Hmm... none of those ideas really work for what I have in mind, but I'll have a think about it. Thanks, guys.

If you want an apparel item to appear on the NPC's body even after death but not in their inventory, you could try converting it to a body part and assigning it to a custom race to be used on your NPC.