If you've been playing Bethesda games for very long, one of the things that is bound to get on your nerves is the game engines. Indeed, even Bethesda's most recent games (the Fallouts) run on what is essentially a reworking of Netimmerse (the Morrowind Engine) called Gamebryo that seems to be held together by spent chewing gum and paperclips. CTDs and wonky physics have become hallmarks for Bethesda games, we can only hope that the latest evolution of the engine, developed for Skyrim, called Netbryo, will lay to rest some of the unsightly and frustrating issues inherent in the last two.
The overhaul of Bethesda's engine is great news for Skyrim and any future Fallout games, but it does nothing at all for our Morrowind experience - we're stuck in the past, with Netimmerse. No real physics, no advanced AI (like Oblivion's Radiant AI), and enhanced graphics only thanks to a graphics extender that is by necessity implemented in a ludicrously inefficient way (and be sure, this is no fault of the MGE devs).
It's not all doom and gloom for the future of Morrowind, friends. In a few years from now, we'll be playing Morrowind with an in-game map the size of the entire province (thanks to Tamriel Rebuilt) or more (thanks to projects like Skyrim: Home of the Nords and Cyrodil: the Imperial Province). What's more, there is a good chance we'll have the choice of one or two complete engine rewrites to choose from.
The oldest of the two projects still being actively developed is called OpenMW. It's written in C++ and uses many high quality open source game development tools. Because the tools they are using are cross platform and open source, when OpenMW is complete it will be available on Windows, Linux, and possibly even Max OS. It will very likely be more stable than Morrowind, it will be possible to update the NPC AI, physics, and it will offer the opportunity for modders to change aspects of the game that cannot be done with the Construction Set - particularly hardcoded gameplay mechanics like skills and combat. On top of that, the modern graphics currently afforded by MGE could be properly implemented into the engine itself rather than through tricking the game with modified .dlls the way the Graphics Extender does. Finally, multiplayer is a strong possibility for OpenMW.
OpenMW aims to be 100% compatible with all of Morrowind's resources, which means that current mods and replacers should work with it. OpenMW will use your existing Morrowind install.
Here's a video demonstrating the current state of the project. Technically speaking, it's very impressive how far they have come. As of the time of this posting, the video is only a few days old.
I encourage you to check out their official site as well as their thread on the Bethsoft forums.