What am I going to do when I have downloaded the .rar file of Morrowind Overhaul - Sound & Graphics? I open the folder "Installation Data" and when that is opened I see all these set-up files underneath the folders. And when I press one of these files, for instance "4GB PATCH (x64).exe" it loads and it openes my ducuments. It says open, but which file am I to open? I don't get this...

check this http://knotstheinane.blogspot.com/p/morrowind-modding-guide.html
there is everything explained if you want to use a 4gb patch

Look for the thread on this forum for "Morrowind Overhaul - Sound & Graphics," and read the instructions document linked in the thread's first post.