While you cannot loop music conventionally, you can play it every time it ends. It cannot be detected from script when a song has ended, so you need to use a timer instead.
Now the timer in Morrowind is not precise enough to be able to predict when exactly X minutes and Y seconds have passed, so you'll need to add a few seconds of silence to the end of your music file. 10 seconds or so should suffice.
Then you'll need to run a global script in Mournhold, something like this:
Begin somescriptfloat timerif ( GetPCCell, "Mournhold" == 0 ) StreamMusic, "Daggerfall\silent.mp3" ;this should point to another mp3 file with just a second of silence to stop the music playing StopScript, "somescript" ;edit this to script name Returnendifif ( timer > 0 ) set timer to ( timer - GetSecondsPassed ) ReturnendifStreamMusic, "Daggerfall\sunnyday.mp3"set timer to 200 ;edit number to music file's length in seconds, the silence part excluded (or even better if you calculate half the length of the silence in there)End
Then you'll need another script that runs locally on a hidden object (for example an activator) placed in cells that are entrance areas to Mournhold, e.g. the Plaza BD and the Royal Palace reception area:
Begin someotherscriptif ( ScriptRunning, "somescript" == 0 ) ;edit this to the name of the other script StartScript, "somescript" ;this tooendifEnd