I always thought Daggerfall was harsh for its storyline quests. Botch one and you've botched the main quest forever. If only there would have been alternatives.
Well, they certainly 'fixed' that for Oblivion
Isn't there a utility somewhere that allows you to reset certain branches of the MQ?
[edit] found it: http://www.uesp.net/wiki/Image:Thawbin.zip
I've never used it before, but you may try it before ditching the character. Might mean you have to redo a few earlier quests in the branch, but it's better than starting over.