Whenever I use a bed, a text box shows up saying: "Unable to complete operation due to failure removing previous file. Temp file remains. Continue running executable? Yes/No" If I click Yes, then the game goes on as normal, except it doesn't show how many hours I slept, there is no autosave, and I cannot level-up"
How do I fix this?

Try deleting your autosave file, it should be in Morrowind root folder\Saves\autosave.ess, and, if there is, autosave.bak

Sometimes the autosave gets corrupted. It's a fairly common error that I've encountered many times. No clue what causes it. Just delete the autosave and move on.

I tried both, but it's still not working!

Make sure you have write permission for the folder that contains the saves and if you have 20 or more collected, archive all but a few of them.