There is also the ultimate anti morrowind mod which removes lots of statics that's just laying around and excess boulders. Another thing I do is use an application to free up memory since MW is a memory hog. Also FPS optimizer.
Most netbooks really aren't that memory constrained. My wife's Aspire One has 1.5GB. Sure, it's possible to hit it, but you are svcking wind long before that.
The problem is the anemic processors, and the even more anemic graphics. Unlike most games, Morrowind is as taxing on the CPU as it is the GPU. Keep in mind, Atom processors are essentially Pentium III's with some of the cache, and out of order stuff, removed to keep the power requirements down. Running on a Netbook isn't all that different from running on hardware from 10 years ago, only without decent graphics support. Most of them are probably equivalent to a 600-700MHz Celeron of the day.
Running a frame rate optimizer is a good start, though expect a severe case of myopia, and static reducing mods will help as well. However, it's important to keep in mind that you are running on a system that would have been considered "low end" even when Morrowind was first released.