Now that I've beaten the main quest, I tried to replace the music files in the music folder. The thing is, it works for some but not for others, especially when it came to Explore music. It often says "Music Error: can not play file." After a bit of testing and noticing that the original music were about 3MB each, I tried and sure enough, when I left only my 4MB song there in the folder, it worked. But my 8MB mp3s crash the game. It didn't appear to be a directory issue. Most of my smaller music files worked fine.

However, with battle music, an 11 MB size one I didn't rename played fine, and yet a 8MB caused the game to crash, so it's puzzling.

Is there supposed to be a specific file size allowed for each song? Will I have to manually shrink all my mp3 files with some program? I'm using Vista but in this case I'm not sure if that's an issue.

I don't think it's so much filesize related as it is encoding related. The MP3 format has a few different ways of doing things, and Morrowind likes its audio in one precise flavor. I would try converting the MP3s to that bitrate/settings (leaving them as MP3s) and see if that works first. You may be able to do it in iTunes, or you might have to use another program.