I recently started a new game in Morrowind, and I never had this problem before until I started playing with the current set of mods. The mods I added were NOM, CM-Partners, Morrowind Crafting, Antares Big Mod, Dracandros and the Bathing mod. For the most part, despite adding these massive mods, everything works fine.

However, for some reason, whenever I click a menu command in dialogue that makes an NPC attack you (i.e. "Resist Arrest" "Challenge him to a duel, right now", refusing to turn money over to bandits that CM-partners adds), I get some kind of dialogue compile error. The NPC still goes hostile and attacks me, so it doesn't appear to be gamebreaking. However, if anyone knows what mod causes this/how to fix it, I'd appreciate whatever input you could give. Thanks.

Do you have http://www.gamesas.com/index.php?/topic/1174576-morrowind-graphics-extender-mge/ installed and what other tools are you using?

Is it http://www.gamesas.com/index.php?/topic/1083121-relz-mlox-a-tool-for-anolyzing-and-sorting-your-load-order/, http://www.gamesas.com/index.php?/topic/1068986-wrye-mash-thread-5/ / http://www.gamesas.com/index.php?/topic/1106095-wrye-mash-stand-alone/?

I'm not using MGE, but I am using MSE. Other than that, just WryeMash

I was having a "RunFunction index greater than count" in the "nolore" script. Does that sound like your problem?

Others, including myself, have had the RunFunction problem:
http://www.gamesas.com/index.php?/topic/1173941-help-nolore-runfunction-error/page__p__17339197__hl__fjol__fromsearch__1
http://www.gamesas.com/index.php?/topic/1035053-script-nolore/page__view__findpost__p__14995208__hl__fjol__fromsearch__1

There is no known cause or solution.
I cut my number of mods down to around 16 ESM's or so and the problem would go away when I removed certain mods but it could never be pinpointed to one exactly.

Yep, it was RunFunction. So there's no way to fix it?? Ugh...that svcks

I suggest that you should install http://www.gamesas.com/index.php?/topic/1174576-morrowind-graphics-extender-mge/, because there is an internal MWSE version included in MGE and too me it looks like that you're not running MWSE.

Sorry

I frequently nuke my Morrowind directory and reinstall about 290 esms/esps (merged down to 255) using the Wrye Mash installers feature.
I do not use MWE but I do use MWSE (through MGE XE) and I still have the problem in my current installation; it's easy to check for it:
Start a New Game
From the console (~), placeatpc Fjol,1,20,1
After you are done talking to the guard, refuse to pay Fjol and the error happens

I suspect a lot of people have this but don't know it.
You could try paring back on your mods but like I said, I had to go down to about 15 before it went away. Or maybe there is some clever, unknown way of merging objects or dialog to avoid the bug.

Update: I tried disabling MWSE in MGE XE and disabled the mods dependent on MWSE. The bug is still there.
Edit #2: FWIW, like you, I also use Morrowind Crafting