More importantly, why didn't Morrowind or Oblivion do that either?
I dare anyone to name a game that has as much detailed and unique character creation as Daggerfall. There aren't many.
I just started Daggerfall, I think I'm level 2 now, received my first quest. I'm amazed by CC. I wonder if Morrowind/Oblivion have a mod for that?
But as much as I am amazed by character creation, I am seeing some flaws in it. It is too early for me to say it though without examining all the details but selecting disadvantages that can be roleplayed is effectively cheating when that means to balance it you can also select advantages which are already cheats. So it's double cheating.
I'm not against cheating or something but for gameplay balance it seems wrong to me.
I think a better character creation:
should let the player start the game at any level. Like starting the game from level 25 directly, then having that class system will have a good purpose. What the hell a matured character doing at level 1?
Also remove the things that can be roleplayed, all the forbidden materials.
For level 1 characters, create some means to receive those disadvantages/advantages during the game. But don't connect advantages and disadvantages. They should be completely separate.
They could be received through quests and/or they can be included in a perk system like Skyrim's but disadvantages must be free so to speak so you can get as many as you want at any point. Some of them can be moved to game difficulty too.
I say a blank state level 1 is meaningful, custom characters can only be meaningful if their stats are reflected in their levels too, in my opinion off course. This is for better game balance.
I look forward to Skyrim's system, maybe these disadvantages can be included.(Bad thing about these disadvantages is, there can be so many of them. Like thousands of fan requested disadvantages, it is very hard to cater to all. Maybe it is best to leave it for modders but still some of them can be quest related and some may appear in game difficulty options.)