Played oblivion and skyrim and love them. Heard morrowind is better , only thing that puts me off it's outdated graphics, is there a mod that 'modernises' the graphics?

Try http://www.gamesas.com/topic/1340389-shelter-from-magnus-blaze-9/.

http://morrowindoverhaul.rpgitalia.net/

Thanks guys. looks good, characters still look a bit boxy tho only so much you can do i guess lol.

oh, they're both different, which is better?

The first linke leadst to MGE XE, a program that extends Morrowind's graphic abilites (shaders, nice water, long draw distance).
The second one is a compilation of MANY graphic mods, and includes several versions of MGE.

Try http://planetelderscrolls.gamespy.com/View.php?view=Mods.Detail&id=213 to make the characters look better. You'll still need a head/hair pack to make the faces better as well; there are tons out there. http://www.gamesas.com/topic/1305729-mod-recommendations-for-new-players/ is the best place to start finding individual mods to customize graphics beyond what the above mod comes with.

We really need a stickied thread titled "Modernizing Morrowind for 2012"(change the year each year) and put in it the links for the various most downloaded mods.

Right, you'd probably be better off with what fragoth posted, as it's generally a compilation of many great graphic enhancements, and it spares you the efforts of taking it all together by yourself.