Hello maybe someone can help answer my question. I am wondering if NPC's can spawn with modded equipment that I've added to the game, such as armor and weapons, or are they limited to using morrowinds base armor and weapons? For example the npc's added to the game by MCA (Morrowind Comes Alive) all seem to use morrowinds default weapons and armor, even though I have added thousands of modified equipment to the game, all of which I have added to Morrowinds leveled lists via wrye mash.

NPC that are added into leveled lists should be able to wear any item that they can equip otherwise. To my knowledge MCA's NPCs wear a number of non Vanilla clothes. Please note however that most patches that add items to MCA will now be obsolete and will not work with the latest version of MCA.

you would have to change the level item lists of what they equip. not just leveled list for npcs. for example if they are equipped with random_de_weapon. you would have to change which ones those are in the leveled item list. sounds like you just added to the loot in the list. not what is equipped on npc's. try using the cs instead of wyre. at least at first to see what is what on which npc's you want to modify equipment lists for.

I've never used the TS before, where should I start?

here's a good place to start

http://www.gamesas.com/index.php?/topic/24-comprehensive-tutorial-and-useful-link-list/