It's been a really long time since I've played Daggerfall so I've forgotten plenty...but the guards keep arresting me for Vagrancy! I've done nothing except being a Redguard, so do I constantly have Johny law on me?

Stop sleeping in the streets! You can loiter all you want but only rest at an inn.

But I don't sleep on the street, and I've only loitered once! o.o