Is it possible to adjust the contrast in Morrowind?

In the menu there is a Gamma setting.
You can move it to the left for dimmer, and to the right for brighter.

Also, all monitors/laptops/televisions have a contrast setting.

First thing you need to do is make sure you monitor is adjusted properly, then you can adjust the game

http://www.tranquilityimages.com/calibrate.shtml