Just wondering what are some essential mods as far as updating the graphics, or any other mods you guys would recommend. Never explored the morrowind mods much so any recommendations would be awesome.

Personally, I never got too far into modding up Morrowind. I will however refer you to several excellent mods in this post by Povuholo. A few graphic visual mods there are relevant to your concerns, at least.

Hope it helps.

Prepare to be blown away by the Morrowind Graphics Extender, Connary's retextures and some of Vality's mods!