I have the original game on retail disc but am wanting to get the dlc's and expansion. It would be cheaper for me to just get it through steam, especially since they have a 25% off sale on the goty deluxe edition.

My question is, is the steam version more prone to problems than a retail disc? Is it more prone to lag or anything?

You might want the Elder Scrolls GOTY Deluxe Edition of both Morrowind and Oblivion with all the official DLC there is released even the Battlehorn Castle DLC is included for the both games. But remember to get this http://www.tesnexus.com/downloads/file.php?id=29388 for Morrowind if you want to use it.

The only thing I know there is no problem with Steam is http://obse.silverlock.org/, because it have it's own solution included with the latest http://obse.silverlock.org/download/obse_0019b.zip version.

I've heard some mods or tools can probably cause you problem, but I'm not sure what mod or tools that should be a problem.

The STEAM version works just fine and is identical to the disc version in every way except the obvious, there is no disc. I own both versions and have never had an issue that was caused due to the version I was using at the time. I've been using my STEAM GOTY edition for quite a while now since it's the most complete of my two collections.

Oh and right now STEAM is having their Holiday Sale that is absolutely amazing in every way possible. The deals are unbelievable. You can get the Bethesda Pack currently on sale for $69.99 USD. Which is a steal for what you get. You get Morrowind GOTY, Oblivion GOTY, Fallout 3 GOTY, Fallout New Vegas, and two other games I'm unfamiliar with. Call of Cthulhu and Rouge. It's well worth every penny. I've bought about 15 games in the past few day and only spent around $60.00 USD.