Thanks for the recommendation infomad.
Another way that you fully "exploit" (I know, wrong word to use) is to load either mods or the Morrowind.esm file itself to load and select ANY item within the game (weapons, books, artifacts, etc.).
For those starting a new game, normally this is what I do to create my Super-Uber Destroyer Character:
Before leaving the room where you pick up the dagger (in EE, this is the Chargen Dagger), try to pick up as much stuff as you can (plates, forks, food items, etc.) just make sure that your character is not over-encumbered. Now, after speaking to the Captain, go out and save your game. Exit, FTP your save file to your PC and start getting to work.
All the info on changing stats, gold, etc. are already covered in this tut so i'll leave those out. Here's a little "tweak" to the tut...on the Dependecies tab, load the main Morrowind.esm file and/or other mods that you may have installed (make sure they're "clean"). Now, in order to fully edit and modify your inventory, you can go the NPC Altered/Killed by Player. This is where you update your inventory. Why? Because your Character data is now “altered” and all the information will be stored here. You can even re-edit your Gold, amount of arrows you have and everthing else. Once you load Mods and/or Morrowind.esm, you can click on the … and it will bring up the window that will allow you to place ANYTHING in your Character’s inventory. Easy enough, right? Transfer your game back from your PC to your Xbox and have fun.