The problems:
People train all their skills to max. Making themselves gods, breaking the realism/game.
People should have the right to master in any skill they devote their time.
People try to exploit skill progression by spending long times doing the same thing again and again.
Yes. This is true.
However...
Morrowind is not an action game. It is not Super Metroid, Mega Man 2/3, Contra, or any of the legendary games that exist in that genre. Morrowind is a role-playing game. And despite what people who develop or play games that were made in the last 10 years may tell you, role-playing games are not about action, nor are they about story.
They are about choices.
Granted, just about any good game will be about choices, but this is by far the most true for games that don't require reflexes or skill. And Morrowind's biggest problem is that any "major" choice presented to you is automatically moot, as all paths lead to the exact same eventual outcome. Regardless of any decision made about the development of your character (which is by far one of the most important set of choices in a role-playing game), the ultimate outcome will be a full set of maxed stats so long as you have either the slightest bit of patience or the slightest bit of gold (the latter, at least, is not that hard to come by).
For a choice to be valid as such, any benefit must come as the result of a sacrifice. Opting to increase your skills as a wizard must ultimately come at the expense of advancing in other areas, or else you're simply deciding which skills you want to increase first. In Morrowind, this is the case. Even your choices of major and minor skills - which should carry great consequences - are just glorified versions of the same concept. In fact, it makes even more sense to select skills you will never use as majors and minors, so that way you can advance in them without everything around you becoming stronger.
I come from a time when video games were designed... well, correctly. Let's turn to one of the more well-known examples: the original Final Fantasy. As with most role-playing games of the time, the most important decisions made came at the very beginning of the game when you chose your team. Four fighters? Great physical offense will come at the expense of a complete lack of magical offense and a near-total lack of magical defense. Four black mages? Awesome power, but your team can probably be taken down by a gentle breeze. Four red mages? Excellent balance, but you'll be unable to truly master any skill to the point of unleashing its full power. Four black belts? Wow, you must really hate yourself.
The lesson is that god-like power in any one area of the game would inevitably come at the cost of sacrificing an equal amount of power elsewhere. Such is the way of the world, and such is definitely the way of an interesting game.
Let's talk about one of my favorite games now: Might & Magic VII. Again, you select a party of four from nine classes at the outset of the game, which in turn sets the limits of the power your team will reach in various areas of expertise. Amongst veteran players of the game, one of the more popular teams is three sorcerers and a cleric, which is the direct equivalent of a white mage/black mage/black mage/black mage team from the above-mentioned Final Fantasy. And this team is popular for the very reason that the ultimate power it provides is the ability to mow down scores of opponents with the greatest of ease.
However, there is a good reason that this team is popular only with veterans of the game: it's incredibly difficult to play for anybody who is not very well-versed in the game. God-like power will come only as a reward for surviving long enough to obtain it, and thus the sacrifice one must make is equal to the benefits received. A much more popular team for new players is the standard Knight/Thief/Cleric/Sorcerer setup, which offers the greatest amount of balanced power, but will eventually become boring tho those who play it and desire to sacrifice more in order to earn more.
Here's another great example: SaGa 2 (known better to American audiences as "Final Fantasy Legend II). I know bringing up a third example of a game that, again, makes you select a team of four from the beginning seems excessive, but this one offers yet another unique perspective. In SaGa 2, each character type grows differently: humans grow from fighting battles and using better equipment, mutants can rely much more exclusively on battle experience alone due to their inherent powers, robots are purely the result of the equipment they use, and monsters are purely the result of the monsters you fight. Balancing these different growth types in your team is key, as a poorly-thought out one can easily lead to extreme difficulty advancing through the game.
But a veteran player can take a team that seems unbalanced or difficult to play and utilize it with great effect. Not a single game I play fails to end with me smashing my way through the endgame with an extremely overpowered team. And the sense of accomplishment I feel for doing so is, well, actually a sense of accomplishment. I feel it because my powers are the direct result of choices I've made in the development of my team rather than a simple level grind towards maxed-out stats. The decisions I made in developing my team are what led me to where I ended up, and different choices would have had far different results. A bad team in SaGa 2 cannot simply reach the same maximum potential as any other team simply as a result of continuing to play. In the worst case, their growth will become stymied almost entirely, thus forcing the player to start over.
Most people who read these little rants of mine think that I'm a) a hardass and B) living at least 20 years in the past, back when games were made to kick your ass and make you like it. And I can't really argue with either of those points. But what I will say is this: Morrowind is, unlike everything else that exists today, a great game. In fact, it has potential to be one of the best ever made. But, in order for it to do so, it must first overcome many of the hurdles that the absolute best before it already have. And playing like a game that was made well after the entire industry went down the crapper is by far the absolute worst handicap a game can have.
So, yeah...