Here's my thoughts on playing a mage in Daggerfall. I'm not an expert, but I've found this works fairly well.
Race: Due to a bug, the race you choose has no actual effect on gameplay. Pick whichever race you want.
Class: Make your own. Seriously, this is a much better option than the pre-made classes. Give yourself high intelligence (for magicka) and high willpower (for spell resistance and ability to bypass enemy spell resistance). I personally like to take points out of strength and endurance, but personality is also a good option to take points from.
Skills/Schools of Magic: Destruction isn't actually that useful as a primary weapon, in my experience. For combat, I would suggest a physical weapon skill. Long and Short Blade are agility-based, while Axe and Blunt Weapon are strength-based. I prefer blade, for the increased chance to hit. Put this as a primary skill. As for magic, I find that Levitation, Recall, and Water-Breathing are the most useful spells, so I like to have Thaumaturgy, Mysticism and Alteration as primary and major skills. Fill out the remaining skills with the other schools of magic, and anything else you want.
Advantages/disadvantages: increased magery is a must-have, preferably x3. Resistance to paralysis is nice, but there's a Restoration spell that can cure paralysis anyway, so that isn't really useful. Resistances to other things are nice, though. As for disadvantages, choose inability to use any sort of weapons/shields you don't plan on using anyway (Leave hand-to-hand available, just in case).
How to play: First of all, if you're used to playing later TES games, I would strongly recommend reconfiguring the controls to resemble those games. In the options menu, you can enable fullscreen mode (removes the UI bar at the bottom) and enable mouse-look (you look around just by moving the mouse, like in later games), and re-map the movement keys to WASD (you will have to change some other controls as well). Next, how to cast spells. (I assume you know the basics of combat, if you made it out of Privateer's Hold). To cast a spell, open the Spell menu (I think Backspace is the default key, but I'm not sure), and double-click on the spell you want to cast. If it's a targeted spell, you will have to press the Activate key while looking at your target. There is also a Re-cast button, which will cast the last spell you used, but I don't remember what the default key for that is. Once you've escaped Privateer's Hold, walk south a short ways to Gothway Garden and join the Mages' Guild. Their Spellmaker will be your friend, and their quests will help you train your skills. Buy the spell Recall. This is very important. Buy Recall. Then, every time you enter a Dungeon, cast Recall (and choose Mark) just inside the entrance. Once you are done inside the dungeon, use Recall (choose Teleport) to return to the entrance. Levitation and Water-breathing are also must-have spells, and should be obtained early on. Sleep isn't a very useful spell, but one of the mage's guild quests requires you to cast it. Last, and this goes for any character, not just mages, sheathe your weapon when not in combat, even in dungeons. There is a small chance that enemies will not attack you, and sheathing your weapon will dramatically increase that chance (as will increasing the Language skill associated with that creature).
Well, I think I've covered everything. Have fun, and may your adventures in the Illiac Bay bring you fame and fortune!