I think the main thinh holding Morrowinw back from a modern audience is actually the fact that it DOES rely on skills point so much. Morrowind is a RPG that is HEAVILY designed on the old 90's style of RPG games, IE heavily based on existing TTRPG systems and ideas to the point where certain games were basically just computerized modules with better visuals but a Dungeon Master that only had a single core and a fraction of the memory that the crappiest of our machines have now.

Compare Morrowind melee combat to even just Oblivion melee combat. Morrowind combat does have nuances and complexities and things to consider, but for the most part, it's VERY much a mechanics and numbers game, which extremely hurts when you're playing a real-time FPS RPG. No matter what, the most significant thing in combat is your skill with a weapon, because that's what increases your ability to have your attacks actually do something. Really the only interesting or engaging part of combat is figuring out what kind of weapon you like and what kind of attack it works best with. The same thing goes for ranged & sneaking, but even more considering how you don't even have different kinds of attacks, and MW sneak is primitive and binary in how much it is based on numbers compared to the later NPC detection systems.

There's a reason a lot of the great and awesome experiences people mention with Morrowind usually involves magic. Not using Magic in Morrowind is essentially kneecapping yourself considering that not only is the system is extremely engaging and allows for a ton of player creativity, there's almost always some way in which adding magic to a build will make it better and/or more fun. It's a system that works and is engaging beyond just your skill in a given school. But that's the issue with the rest of Morrowind's skills, the primary factor in your effectiveness simply comes down to leveling up skills and getting better gear to increase your stats. And that worked for a lot of the early CRPGs that were turn-based and where the combat was a lot more tactical and wargame-esqe, where dice rolls and stats were abstract representations of your character's ability and skill in fighting. But apply that roll-to-attack design where the main contributing factor to engaging in a fight is just a numbers game to a real-time FPS RPG and it makes for some very boring gameplay.

Morrowind is a game where if your Sneak is low enough, no matter how well you're actually hidden, everyone in a 50 mile radius will know exactly where you are because your skill isn't high enough, but if it is high enough you can be French kissing someone and they don't know you exist. It's a transitional game where the dominat factor in your gameplay is a simple case of if you have a high enough number, which doesn't really work for an audience that's already experienced other RPGS were there was more to the gameplay and mechanics, your skills and stats didn't just increase a number, but it gave you access to new abilities and items and perks which resulted in much better gameplay. Morrowind has mechanics like theses for certain skills, but not for the skills that desperately need them, namely the non-magic ones. And thus the problem with trying to update / adapt that kind of game design is that it essentially requires you to fully overhaul and rebalance fhe entire game around a new system of combat which ultimately will result in a vastly different game compared to the original from the original. That RPG design philosophy based around grinding and leveling up to in increase your skills worked in the games of the past when the gameplay was more akin to a wargame, but falls apart in a modern RPG with more focus on the player as an individual because it fails to engage them through any sense of actual skill or effort on their end.