Morrowind was pretty awesome, even without mods. They really captured the feel of another world, and I never knew what I might find there. Mods just made it completely epic (Vampire Embrace, anyone?). Oblivion was better on a technical level (its physics, for one thing), but I didn't care for the plot, and the world seemed less interesting to me compared to that of Morrowind. However, with mods Oblivion did begin to come into its own, though not to the extent that Morrowind had.
Of the Bethesda RPGs I've played, I'd rank them thus:
1) TES III: Morrowind
2) Fallout 3
3) TES IV: Oblivion
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