Morroblivion takes stuff from morrowind and puts it into oblivion, so NPC's look better than stock morrowind as they use oblivion bodies and heads.
However you can get morrowind NPCs looking just as good, by downloading better bodies and a head replacer mod (http://www.gamesas.com/bgsforums/index.php?showtopic=994490).
A lot of morrowind's armor isn't even in Morroblivion yet (I don't count using Oblivion's armors as having morrowind armor
).
If you use Morroblivion you are playing Oblivion, it just adds the Vvardenfell from Morrowind into Oblivion. So it requires Oblivion.
If you use MGE you are actually playing Morrowind with better graphics. It doesn't add any items, if you want better looking items, look through the many texture replacers out there.
TBH you'll find the morrowind landmass looks out of place in oblivion though, as they havn't added normal maps to the morrowind textures yet
Looks worse than my Morrowind, MGE and ENBseries combination, you can see other people's Morrowind screenshots http://www.gamesas.com/bgsforums/index.php?showtopic=981438