So as you are all aware (or maybe you're not aware if you've only ever played the PC version with expansions), in vanilla morrowind you can "mug" people, as in once they run out of stamina you can loot them. Called mugging because punching drains stamina instead of damaging health. So, as far as I know, it's always been deemed a bug that one of the patches/expansions removed mugging, but I'm curious as to whether or not that was really a bug, or if Bethesda removed it on purpose?

"Mugging" as you call it drains stamina first and then drains health. At least, that's how it has always worked for me. And, looting unconscious people was introduced by the Morrowind code patch, if I recall correctly.

I'm not 100% certain, but my understanding of it was that it was in the original game, but "fixed" in the expansions as an unintended bug (removing an unintended "feature", rather than fixing things which were actually "broken"). The Code Patch merely restores it to its "unintended" state, if you choose to allow it to do so.