I just started playing Morrowind again, and proceeded to download a few mods, and made sure everything was working correctly. Everything is fine, but when I go to pickpocket, steal, or assassinate someone and I get caught, instead of charging at me with their weapons, guards will melt my face with massive seizure inducing AOE, that not only kills me, but other NPCs in the vicinity. NPCs in their homes have blasted me out the door with this crazy fire attacks, and I even had to console the Dark Brotherhood assassin to death due to the same exact attack. Why do all these NPCs use that same attack, and has anyone else ever experienced it? If so, any advice as to how I can fix this?

Mods include

Morrowind Code Patch
Morrowind fpsoptimizer
Vality's Bitter Coast textures
Vality's Balmora Addon
Vurt's Ashland Overhaul textures
Vurt's Leafy West Gash textures
Vurt's Ascadian Isles textures
Connary's Grazeland, Imperial, and Telvanni textures
Balmora Ghetto
Enhanced Sky
Dark Brotherhood Armor replacer
Darknut's hi-res Armor, creatures and weapons
Neo's Unique Creatures
Dura graBols House Extended
Better Heads
Better Bodies
Better Clothes
Morrowind Comes Alive 5.2
Tamriel Rebuilt map1&2
Atmospheric Sound Effects
Unique Banners and Signs
Acrilix's hi-res signs
Clothiers of Vvardenfell
LadyD Reduced Commentary

This is a mod related effect, if you list the mods you have I will move this to the correct forum.

Okay.

Sounds like the glitch caused by someone using Auto-Calculate for Spellmaking when they shouldn't. (this then gives that spell to every NPC in-game, which they will use in battle.)
I would try http://code.google.com/p/mlox/wiki/Mlox first, if it's a well known mod then Mlox will likely tell you which mod is causing the problem.
My guess is Neo's Unique Creatures... iirc.

Note on sharing your list of mods:
The best way: Open Wrye Mash and highlight your Save. Right click on the 'File' header in the lower right hand box, and select Copy List. You can now paste that list in your thread.
If you don't have Wrye Mash yet: Open your Morrowind.ini file, found in your main Morrowind Folder, and scroll to the bottom. Copy/paste the entire list of mods under the [Game Files] heading.

I'd be surprised if it was Neo's Unique Creatures, because I thought that mod was only supposed to give certain creatures new meshes, not change anything regarding spells...

Neo's Unique Creatures doesn't add or modify any spells, so you can rule that one out.