You only have about 5 faces/hairstyles to choose from for each six of each Race.... but there are many great mods that add hundreds of new faces to choose from.
If you play as a Dunmer you are still treated like an outlander, because you weren't born in Morrowind, you came from Cyrodiil.
Any NPC of the same Race as yourself will like you a bit more, but everyone is going to treat you like crap for a long time. You're a poor ex-convict, and no one wants you around
There are many different cultures to experience in Morrowind. The three Great Houses each have different lifestyles and architecture. There's also the Ashlander tribes, and the Nord's on Solstheim for more variety. So, yes... a Dunmer from Cyrodiil is going to see new sights.