Setup:
Windows 7 professional x64
radeon 4870 512MB (CCC 9.10)
e8500 cpu
Morrowind GotY + Morrowind Patch v164 + Morrowind Code Patch 19510
The game runs great... until I enable both shadows (the slider in the video options) and any level of anti aliasing (from the catalyst control center).
The video frame freezes, the music keeps playing, keyboard stops reacting, and in a few moments I get the windows end now dialog.
The problem is that the Video Driver crashes. (in Vista I tried a lot of versions prior to 9.9 and all crashed as well)
Here's what the event viewer reports
http://i264.photobucket.com/albums/ii182/Transsive/tech/crash1.png
http://i264.photobucket.com/albums/ii182/Transsive/tech/crash2.png
I'm a little worried that the graphics card might have some problems.
So even if you don't know a solution to this, if you can, please try running Morrowind with both shadows and 2x or 4x AA (especially people that have a card in the HD4000 series with 64bit vista or 7) and let me know if you experience crashes.
Here's a save game you could use if you want. (I usually crash during the first few fights with the skeleton... fight, die, reload, fight, crash...)
Just enter the tomb and start swinging.
http://www.box.net/shared/fmvrvuci5g