It spunds like the game is unable to find the resoucre files it needs for the mods to work, and the bright yellow/white parches you are seeing are the default models the game resorts to using when it cannot find the correct ones for the mod to work correctly , this will be happening for a couple of reasons,
1. The resource files have been packed in a .bsa archive in which case the archive needs to be regisetered for the game to find it.
http://www.gamesas.com/index.php?/topic/1095203-struggling-to-install-a-certain-mod/
OR
2.The various resource files have not been put in the correct location in your data files folder. Most likely you have inadvertantly created a second data files folder within the main one that has your mod resource files so you will need to take them out of the second and place them into their corresponding folders within the main data files folder , see mod FAQ's for tutorials on how to install mods.
http://www.gamesas.com/index.php?/topic/106063-morrowind-mods-faq/