I would start fro the basics. Please, excuse me that I have to repeat a lot of well-known issues and correct in case of wrong assumptions. I will mainly concentrate on NPC animations and would mention specifically in case of PC related stuff.
Some history (to my knowledge):
1. RX31 was the fist who has created (in 3Ds Max) considerable number of custom MW animations based on available bvh mocaps.
2. Oshiel was the first (and the only one so far) who has created a PC Animation Replacer mod.
3. Mr.Cellopane has created the most sophisticated (released at the present moment) animation control via scripting.
4. LizTail has created "MW Animation Kit", a tool set dramatically simplifies MW animation packing and therefore creation.
5. I have found the way to add animated extra bones to MW NPC skeletons.
Tools and tutorials.
1. 3DS Max with original Bethesda exporter plugin (works with Max3,4,5) or with NifTools Max Plugin (import/export; works Max5,6,7,8,9,2008,2009) or Blender with NifTools Plugin (import/export; I am not a Blender user and, unfortunately, cannot provide useful advices for this free but complicated IMHO software). I assume that the links to these programs are well-known. Max2008/9 users are advised to check this Tazpn's WIP topic:
http://www.niftools.org/wiki/index.php/NIF_File_Format_Library_and_Tools
2. Animation Toolbox by RX31 (a very useful tool for Max users, Maxscripts):
http://rx31.rethan-manor.net/pages/animtool.htm
2. LizTail's Morrowind AnimKit 2.0: http://www.gamesas.com/bgsforums/index.php?showtopic=868016
3. Max blank animation files by Bethesda Softworks, can be downloaded for instance from here:
http://www.ageinc.com/Morrowind/Thanos_Tower/maxpage.html
4. MaxImmerse and NetImmerse viewers, nif documentation can be also found on Thanos Tower.
5. All collected by me animation tutorials created by many authors:
http://www.4shared.com/file/60996990/46f26751/MW_MAX_Anim.html
6. NifSope (the last but not the least).
MW animation related files.
MW has the following original animation files:
anim_dancingGirl.nif (a very interesting example of "custom" NPC animations)
xanim_dancingGirl.nif
xanim_dancingGirl.kf
Argonian_SwimKnA.nif (Argonian's specific swim NPC animation)
xArgonian_SwimKnA.nif
xArgonian_SwimKnA.kf
base_anim.nif (main animations for human NPCs and 3-d person view human PC animations)
xbase_anim.nif
xbase_anim.kf
base_anim.1st.nif (1-st person view human PC animations)
xbase_anim.1st.nif
xbase_anim.1st.kf
base_anim_female.nif (female specific NPC/3-d person view PC animations)
xbase_anim_female.nif
xbase_anim_female.kf
base_anim_female.1st.nif (female specific 1-st person view PC animations)
xbase_anim_female.1st.nif
xbase_anim_female.1st.kf
base_animKnA.nif (beast races NPC/3-d person view PC animations)
xbase_animKnA.nif
xbase_animKnA.kf
base_animKnA.1st.nif (beast races 1-st person view PC animations)
xbase_animKnA.1st.nif
xbase_animKnA.1st.kf
As you can see from above MW obligatory requires three files for every animation storage:
1. Main animation nif (e.g. base_anim.nif). This file is not used by the game engine and probably required only for display purposes in the TESCK. However, it should be obligatory present, its content could be any valid MW animation nif. This file contains animation data plus skeleton plus meshes (body parts). I guess it is something similar to NDL/Gamebryo .kfm animation file format that is not used in MW.
2. x.nif (e.g. xbase_anim.nif). This file contains information about skeleton structure and some additional animation nodes like Bounding Box (a sort of a reference for the skeleton root bone (Bip01) and collision mesh); Tri QuadPatch01 node (mysterious skinned/physiqued structure that I guess plays a certain role in hit combat detection); mesh boxes that are attached to bone chains or bones (I guess those are collision propagation nodes without their branches the corresponding body part will be corrupted in the game); PC skeleton has some other obligatory nodes that are not well documented e.g. camera. Skeleton structure in a x.nif should be identical to the skeleton used for all skinned/physiqued body/clothes/armor meshes/nifs that are used for this character. For instance Better Bodies are using a very good approximation of original skeleton (at that time there were no tools or blank animation templates available), as result the hands are not perfectly aligned to finger bones and in game the BB hands look odd (BTW LizTail has fixed that problem).
3. kf file (e.g. xbase_anim.kf). This file contains only animation data. Basically this is the only file we need to create for standard skeletons because the other two could be just renamed accordingly any working MW animation nifs. It is mportant that skeleton structure in x.nif and .kf should be identical (skeleton structure used for kf generation and in x.nif should be identical).
Animation files location. All three files should be in the same folder in MW "Data Files/Meshes" directory e.g. "Data Files/Meshes/MyAnim" or just in "Data Files/Meshes".
MW game engine loads/"searches" for animation files in the following order: 1. Attached to an NPC (for PC 3-d person view there is an NPC with ID "player", Dark Elf) in the TESCK animation nif (search how to do that in TESCK tutorials, note that only one file (e.g. MyAnim.nif) can be attached, therefore it should contain all sequences); 2. In "Data Files/Meshes" in the files with original names specified above; 3. In MW bsa archive files.
Animation file naming is important: for global replaces it is necessary to use original file names mentioned above; for custom animation all three files should be named in the following way: MyAnim.nif, xMyAnim.nif, xMyAnim.kf.
MW game engine "recognizes" what particular animation sequence should be displayed at a certain game moment by "looking" into the note tracks text keys. Text keys are hardcoded (there is no chance to add new ones) and can be seen in the TESCK as well as in NifScope (block details window of the NiTextKeyExtraData node). A list of text keys and some very useful information can be found here:
http://preik.net/morrowind/animationgroups.html
MW PC/NPC animation control via scripting. There is only one properly working for NPCs MW animation scripting function- AIWonder and it is limited for Idle3-9 sequences; to my knowledge there is no direct PC animation controlling function.
Bone names are also hardcoded. Here's the full list of allowable Morrowind bone names created by LizTail:
Shield Bone
Bip01 L UpperArm
Bip01 L Clavicle
Weapon Bone
Bip01 R Finger42
Bip01 R Finger41
Bip01 R Finger4
Bip01 R Finger32
Bip01 R Finger31
Bip01 R Finger3
Bip01 R Finger22
Bip01 R Finger21
Bip01 R Finger2
Bip01 R Finger12
Bip01 R Finger11
Bip01 R Finger1
Bip01 R Finger02
Bip01 R Finger01
Bip01 R Finger0
Bip01 R Hand
Bip01 R Forearm
Bip01 R UpperArm
Bip01 R Clavicle
Bip01 Head
Bip01 Neck
Bip01 Spine2
Bip01 Spine1
Bip01 Tail3
Bip01 Tail2
Bip01 Tail1
Bip01 Tail
Bip01 L Toe0
Bip01 L Foot
Bip01 L Calf
Bip01 L Thigh
Bip01 R Toe0
Bip01 R Foot
Bip01 R Calf
Bip01 R Thigh
Bip01 Spine
Bip01 Pelvis
Bip01
No other names can be used. Human NPC skeleton contains not all of the above mentioned bones Hence, these names can be used for extra bones (e.g. wings).
MW animations should be sampled with 15 fps.
I think this could be enough for introduction. Please, do not hesitate to ask questions and share your MW animation experience.