My settings aren't being saved. Custom controls, video / audio / game preferences, they are all being reset when I close and reopen Morrowind. I also tried to change the registry to allow 1600 x 900 resolution, that is being reset to the default 1024 x 754 also.

Any ideas? I just bought the game on steam and I'm running Windows 8.

There are two possible culprits: one is that the game doesn't have permission from Windows to modify files in the /programs directory. The other is that Steam is "fixing" broken files. Note that several later versions of Windows don't allow files to be modified in the /programs directory, so making a seperate /games folder on drive C:, or relocating the entire /Morrowind directory structure there might solve the problem.

It's a good idea NOT to install to the default location, since Windows has changed its "preferred" file organization since Morrowind was released. I have XP, and it's not a problem, but many Vista users had that happen. I'm assuming that Windows 7 and 8 are similar.

By the way, this should probably have been started in the forum for hardware and installation problems, rather than the Morrowind "General" forum.