I can't remember for sure if there's a way to make a mod located in a new worldspace for Morrowind. I'd like to design an island far away from Vvardenfell or Solstheim or any other inhabited area for that matter. If this is the case, any instruction or even a webpage giving instructions would be much appreciated.

You could make it in an interior cell , Kat's castle is one such mod that is buit on n island in an interior cell and several others have too, other than that it would have to be a total conversion which is essentially a new game else it has to be part of the same worldspace as VVardenfell

The Tamriel Rebuilt team has made an expanded worldspace, which is actually too large to fit on the standard map. You have to use a patch or other utility to get the map to display some of the added landmass. I'm thinking that if they did it, maybe you can get some advice from their website, or ask there. The problem with going outward is, your landmass is going to conflict with someone else's mod in any direction other than perhaps due North (past Solstheim).

An interior cell or a total conversion are the other alternatives. Someone uploaded some sort of "blank" worldspace for TC mods a couple of years ago, I vaguely recall, or maybe it was a "blank" Vvardenfell landmass, with everything else removed but the ground. You might want to check TESNexus or PES for any applicable TC utilities or empty landmasses for ideas.

I've seen some of the blank .esp's. I'm not looking to make a total conversion. The player basically steps into a portal leading to another world, and one that's non-accessible by swimming, flying, etc. A new worldspace would keep them contained until I provide a means of exiting. I know there is the "Interior Cell" option, but I would like to keep them on the ground by means of disabling levitate or teleport magic. If I remember correctly, I thought Mournhold had some sort of activator or shield that kept the party from doing these things. Or maybe it was a script. Either way, I want the player to think they're trapped until the completion of the journey in this new realm.

@Kovacius: If you're referring to parts 1 & 2 of Tamriel Rebuilt, i'm currently using them for a different character. I'm definitely a big fan of that mod. The Morrowind Code Patch allows the map to be shrunk so you could see the TR landmass perfectly, in case you didn't know.

There is no such thing as worldspaces in the Morrowind engine. That was introduced only in Oblivion. You've only got exterior and interior cells, and all exteriors have to be in the same "worldspace" as Vvardenfell.
Mournhold are all interiors looking like exteriors, and disabling levitation and teleport spells are flags you can set on interior cells.

Ahh ok. I kind of figured it wasn't available. I can work with that. Thanks.