I would have to disagree with Oblivion's graphics being awful. I think they're rather good. Probably the reason they look bad is because the people look bad, and it kind of drags the whole thing down a bit.
But as for Morrowind, GET IT. It's incredible. The story is far more interesting than Oblivion (IMO), the game world is larger, and I find the setting of Vvardenfell a lot more interesting than Cyrodiil because of the history and culture of it. Granted, if you think Oblivion's graphic are bad then you really won't think much of Morrowind's, but some graphical mods quickly sort that out and they end up looking pretty good (do remember that the game is from 2003). One of it's major drawbacks is the combat system, which is frankly rather pitiful, but really you just have to get used to it and after that it's alright. Of course is going to feel a bit more limited than Oblivion, with the text dialogue and such, but there are a lot of mods out there that add scripts and schedules to make it more dynamic.
It will take some getting used to after Oblivion, but it's well worth it.