I've been trying all day to get the Overhaul to work with Steam, but I just can't seem to. When I leave the overlay on, of course I get the black screen. When I turn the overlay off, Morrowind won't even start and it gives me an error about there not being a CD in the drive. Can someone please help me get this to work?

The CD drive issue is about a previous installation conflict according to my experience. Just uninstall all Morrowind instances.

If that doesn't work, use something like CCleaner to delete Morrowind entries, it should work.

Like in this screenshot,
http://intoolate.files.wordpress.com/2010/09/2010-08-28_205639.jpg
but for Morrowind.

Thank you very much. I'll give this a shot.