Do you have waves on? Reducing all the water options to the simplest possible is the best you can do, besides disabling MGE completely.
Morrowind FPS Optimizer might help out your fps in general, if you don't already have that. Not sure if it comes with the overhaul or not.
Yes I have all the water options off, but I haven't tried FPS Optimizer yet.
I imagine its the edited water.fx shader that comes with Morrowind Overhaul. It adds foam around the coast and pretty much kills your FPS, even on high end systems.
I suggest you download MGEXE and use the default water shader. Just copy and paste the shader over the current one.
I replaced the water shader (XE water.fx) by the one in MGE XE 0.9.8 beta but when I started a new game, there was a message that said an error occurred, and the screen was almost all blue, I only could see some white things, that I imagine was Jiub.