It automatically knows the mods that doesn't need merging and leaves it alone without me doing anything?
And I think I have a problem with wrye mash, it doesn't seem to detect my saved games. It doesn't show my saved games in the save tab, and the list of mods are all unchecked in wrye, while most of them are actually checked in the game.
1 - Yes.
2 - Are you using Vista or Windows7 ?
Make sure you http://www.gamesas.com/index.php?/topic/781497-vistawindows-7-problems/page__view__findpost__p__11352753, and then you need to tell Wrye Mash to "see" this change.
Assuming you have the Stand-Alone version, (and after changing location) Open Mash and click the green floppy-disk icon at the bottom left of Mash. It will allow you to change the location Mash is looking for. Set it to your new Morrowind location.
(I hope I got that correct... it's really late here
)