It's a novel idea, but when I think about my favorite times in Morrowind the fun was being all on my own. Walking around in an ash storm being pissed off about being lost wouldn't really be worth while if there was someone else there. I always felt relived when I got back to a town in Morrowind because there were finally people again.
Besides all of the Elder Scrolls games have a broken aspect, magic in oblivion and alchemy in Morrowind. An MMO would make the breaks more apparent