It has two black bars at the side. My resolution is at it's highest and I made sure I was playing fullscreen. Any help would be appreciated.

Man, this section is near dead.

Morrowind doesn't natively support widescreen resolutions. Pillarboxing is usually an option in your monitor's firmware, but may also be control in the graphics device driver software.

MGE will allow widescreen support, so Morrowind will fill the entire screen. Download link: http://sourceforge.net/projects/morrgraphext/

Downloaded, but how would I install it? There is no readme.

For that file you'll need 7zip or similar.

Simply place the files in the Morrowind folder (ie C:\bethesda softworks\Morrowind). Note: If you have mods installed its recommended that your copy over anything from the data files folder individually to prevent overwriting files.

After that click the MGEgui.exe file.