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Stealth in Morrowind is useful in a lot of ways, but just not for reliably dealing a critical strike.
One useful side of stealth involves being able to unlock doors and steal things off of shelves unseen, even when not too far away from people who would otherwise notice you. You won't be close enough to sneak attack, but it's far enough not to be noticed.
Similarly, it enables you to engage in one on one combat in some circumstances, where otherwise you would attract a second or third attacker (i.e. you remain in stealth while attacking, so other enemies aren't drawn into the fight).
That being said, even from the very beginning, you can go to Caldera I believe, and get a Ring of Aversion (10s Invisibility, very cheap), and invisibility will significantly raise your chance of stealing and dealing critical damage with sneak. Interestingly, although I'm playing the classic version, I can deal critical damage with sneak while in front of the opponent, so it's not exactly like a "backstab," and it can be used with any size of weapon (i.e. a dagger, longsword, dai-katana, claymore, etc.)
One interesting thing to notice with invisibility is that if you try to pickpocket an opponent, you will instantly become visible, so chameleon is basically needed for the most effective way of pickpocketing. The same applies for looting containers (you become invisible), and clicking on books to read prior to picking them up (you become visible). But if you bring up your inventory, you can actually pick up books without reading them, so you can steal them while invisible as well.
Another problem with dealing a critical strike is that if your weapon skill is low, or you are low on fatigue, then you'll have low accuracy to begin with.
There's also the fact that stealth mode is pretty slow, and I prefer to run and sprint/jump or fly (can't enter stealth mode when levitating), since there is a lot of terrain to cover sometimes.
That being said, *SPOILERS* - - - - - - - - - - - - - - - - - - - - You can beat Dagoth Ur pretty easily with 120 Strength and Agility (I had the artifact gauntlets equipped), 80 Luck, 100 in Short Blade, an Ebony Short Sword, and the Ebony Mail.
The same was for Vivec, but I had to use one potion of restore health, and another of restore fatigue.
That's all it takes. 4 items, and unextraordinary stats (no potion abuse, no corprus disease abuse, etc.). Mind you, I was at level 48 and had around 280 health lol (but I only leveled Endurance to 60 for a self-imposed handicap challenge--this was raised from 40 pretty late).
Sorry to double post, but there is no edit button. I just wanted to also point out that, interestingly, there are only two quests in the Thieves Guild that actually require you to fight anyone. There is one quest where you have to go into a dungeon, and there are a few enemies there worth killing for special loot, but aside from that, there's no need.
By contrast, nearly every Morag Tong quest involves killing one or more people. That being said, it's a guild for assassins lol.
Sorry to double post, but there is no edit button.
There is if you click on Message Detail for your own posts within half an hour of posting them provided you have sufficient board rank/karma to unlock the feature. If you use FireFox and the GameFOX addon it puts an edit link right under your name on the same page as your posts.
Stop complaining. I could have done this more painfully. - Dryad from Sacred 2.
As much as Morrowind is better than Skyrim in many aspects ,Skyrim's gamplay mechanics just blow Morrowind out of the water. This goes for stealth ,combat system ,speech(although it could be argued that Oblivion beats both in this) and leveling.