The only thing I think is outdated, or obsolete about Morrowind are it's graphics and animations. Other than those two issues, I think it's more advanced than Skyrim, and a lot more advanced than Oblivion. And the art style of Morrowind more than compensates for it's shortcomings anyways particularly compared to Oblivion I feel.
You could always try Daggerfall though, I've found it to be quite buggy, and while I liked it's dungeons, I've found it's outdoors elements to be repetitive, and it's cities/NPCs to not be as interesting as Morrowinds. I played it for a while not long ago, but got frustrated I think when my Wagon holding my items bugged out.
I totally agree with that, I think graphical progression is good, but that too much focus on graphics can cause everything else to gradually decay and degrade while the graphics, and only the graphics advance. I've long though that far too often advanced graphics have been a crutch for more simplistic and more predictable games.
For as long as I live, I'm always going to wonder if I ever see a game vast and complex as Daggerfall with Skyrim-Tier graphics. How long until the technology required for such a creation will exist? And how long will it be until someone makes a game like that? 10 Years? 20? 40? 50? 100? Maybe if I live to be 120 I'll see such a game?????
What I am hoping is- at some point graphics will reach an apex point, where they are as realistic as they can ever be... Then once all the mysteries of realistic graphic making have been unraveled, pretty graphics can no longer "carry" future video games, and future video games will no longer be judged upon graphical quality. With the graphics thing reaching it's max point, game developers will be forced to be creative in new ways.
If you want to save what I consider best for last, I'd go Oblivion->Skyrim->Morrowind. If you want to play the imo easiest TES game first, start with Oblivion, if you want it in lore-based order then Morrowind->Oblivion->Skyrim. I personally wish I started with Oblivion, then Skyrim then Morrowind, cause I wouldn't have been disappointed that way. Though I started with Morrowind.
Funnybunny is right, each TES game is so different from the other- especially between Daggerfall and Morrowind, and between Morrowind and the last two TES games, that they almost feel too different to be sequels. KOTOR 2 feels like the sequel to KOTOR 1, but Oblivion to me didn't feel so much like a sequel to Morrowind, and I played all those games to the end. All the complaints about diceroll combat make me feel old. Back during my days diceroll combat was the norm, and it was generally just considered a normal part of the vast majority of RPGs... And now diceroll mechanics without an isometric perspective is considered a bit of a taboo.
Before I played Morrowind I watched my stepfather and mother play Ultima Online some times, and I saw them enter combat, and pretty sure I remembered them missing attacks sometimes, I also played Super Mario RPG before this, and remembered missing attacks too I am pretty sure. Now, Ultima Online having no pausing in combat is more similar to a TES game in that regard, but both are old school RPGs. Way back then my stepfather wouldn't let me play or watch Final Fantasy other than a few tiny combat scenes because of the rating, but it's mechanics AFAIK were similar to Super Mario RPG. So when I played Morrowind for the first time I gladly welcomed it's hit and miss mechanics with open arms.
I watched my parents play old school RPGs with miss mechanics, and then some generations younger than them, it was still the norm, and for me, it wasn't just like a family tradition, and old school RPGs were a major part of my childhood- old school RPGs weren't so much a thing during my parents childhoods, and I looked forward to being able to play more old school RPGs in the future way back then. Now I see a future generation, that commonly considers miss mechanics to be "obsolete" "irritating" and "outdated", and it feels so strange. I'm one of the people who was young enough that old school RPGs existed during my childhood, but at the same time old enough that by the time old school RPGs started vastly changing to the point of being very different from old school RPGs, they were unfamiliar to what I experienced during my childhood.
I had hoped future RPGs would be old school RPGs with just better graphics, and larger worlds, but I feel like that isn't what I got. It just feels strange to grow up with something, that is like a cornerstone of your childhood, then when you grow up, it's then considered obsolete and outdated by a lot of the world around you.
That all said Morrowind is definitely an Old School RPG... And definitely... Unique.
I think Morrowind's biggest issue was the animations being overtly stiff- this being most noticed in combat, and when everyone dies they always fall down exactly the same way. Though imo that's all about graphics.