I didn't have a favorite in Oblivion, but my favorite Morrowind book is "Homilies of Blessed Almalexia". The short story 'Sotha Sil and the Scribs' is great.
Yes indeed.
I didn't really like the book font in Oblivion, and haven't a mod to change it yet. From Oblivion it has to be probably, Glories and Laments. The Ayleids were nice and shiny, regardless of other things.
All time favourite? Daggerfall Jokes, of course.
A Dark Elf woman was being shown around Daggerfall. When she was shown the magnificent Castle Daggerfall, she smiled sweetly to her guide and whispered, "It reminds me of six."
"That's odd," said her guide. "Why does our Castle Daggerfall remind you of six?"
The Dark Elf sighed, "Everything does."