I was asked to give some instructions on how to install plugins, and i figured that there are probably other people having trouble with this too, so i'm posting the steps here.

Besthesda made installing plugins very easy.
All you have to do is take the .esm or .esp file that comes in the
Zip file you downloaded and put it in the 'datafiles' directory in your morrowind folder ( usualy C:\program files\bethesda softworks\morrowind\datafiles ) then when you start the game click the 'datafiles' button rather than 'play' find the name of your
plugin and double click it. This should give it a checkmark (or an X cant remember which).
Now hit ok and hit play.

Thats all there is to it.

Thanks Slackerboy. It sounds easy and I will give it a try. Yesterday, I dragged the plugin to the data files, but didn't notice anything different when I started the game. I'll give it a try now and see if it works.

dont for get the part where you have to click on DATAFILES on that first little screen that comes up when you start the game.
And then double click on Your plugin.
This is what turns your plugin on.
You can also use this to turn plugins off.

Watch your startup screen after installing plugins. If there is an error in the plugin, the game will ask you if you still wish to install plugin...

Very nice and considerate function...

Remember to save the game into a new file before activating the plug-in. Just in case if the pug-in spoils the game too much you could revert the savegame without compromising the entire game.

Some Plug-ins do effect your gameplay even after you have deactivated them because your savegames have already incorporated those changes.

Your instructions were perfect Slackerboy, no problems. I figured out what I was doing wrong the first time. I didn't realize the file was zipped and I was trying to install it in its zipped condition. Stupid me. Got it to work. Thanks again.