I was browsing through the UHS (Universal Hint System) walkthrough for Morrowind and I found a very interesting way to build a strong character. The author of this walkthrough calls this method "Riding The Creep Train." I thought I woulsd share this here. I won't go into all the details but will leave a URL to that page at the end of this message.
Anyway this walkthrough tells you the best places you can loot at level 1 and what merchants will pay full value for most of your items. Once you have lots of money you can train your way up several levels without doing any quests! I found that some parts of this method were not as easy as the walkthrough made it sound but I advanced my character from level 2 to level 8 or 9 in a very short time.
So whether you're just starting out or been playing a while, I definately recommend checking this out.
http://www.uhs-hints.com/uhsweb/hints/morrownd/15980.php