That's true, but we're getting to the point where the DSi isn't a whole lot more weaker than the original Xbox by now, given its huge upgrades over the original DS. (twice as much processing power, four times as much memory, plus a 256MB "hard drive") This places it well past the level of power that was needed for Daggerfall. Plus there's the fact that the lower your screen resolution, the less processing power and memory you need; 256x192 in 3D needs a chunk less than 320x200; this is why most Xbox 360 games don't actually reach 1280x720; it's only about four times as powerful as the original Xbox, which was capped to 720x480; if they went with the full resolution, they could only have the game have around 50% more detail and effects than an original Xbox game.
So in short, it takes about 1/7th the graphics power to do something at the DS's 256x192 compared to the 720x480 of the Xbox or Wii. And there was also a video of someone who'd ported the models of NEverwinter Nights, and similar graphics effects, to the ORIGINAL DS, where NWN was a game on a near-par with Morrowind. In short, I think that given what reductions would naturally have to be made for resolution, that the DSi could probably outright handle a port of Morrowind.
Still, not that a TES Adventures game wouldn't be a bad idea, especially given gamesas's apparent strong distaste of going with Nintendo for seeming "uncool." Also, I'd point out that Battlespire was not an Adventures game, but in fact, the only game of the TES Legends series; i.e, Adventures is an action-adventure genre, while Legends is an FPS.