But there are dragons in Morrowind. They just fly very high. And the ones near the ground are invisible.
Also, you guys are seeing the split between player skill and character skill. In a tabletop RPG you generally see character skill apply in places where you need fine detail or there would be constant "cops and robbers" style "I would have ducked" kind of back-and-forth arguing. Everything else is fine when covered by player skill.
For example, you could have a game where inventory is a character skill, not a player skill. The character would have say 3 Supplies and when he needed rope he would roll 3 chances at his Expedition Planning skill and if one were a success he would mark off a Supply and suddenly one of them is a rope that he needs. If he failed, it means he wasn't very good at planning expeditions and picking the right gear, and he hadn't brought any rope.
But in D&D the player is expected to have player skill in that area. The player decides what gear he will take based on encumbrance capacity and available money, and if he arrives at the dungeon that has lots of vertical traverses and he was smart enough to pack 600' of rope, he knows it was an achievement of his player skill.
In an FPS for example the aiming is part of the player skill. Re-aiming to compensate for recoil, choosing how many shots in a burst based on recoil and range, when to reload, when to use a sidearm instead of the main gun, etc. are all commonly accepted as aspects of player skill. But the weapon damage is an aspect of the weapon, and recoil is an aspect of the weapon. But perhaps it's acceptable for character skill to affect weapon damage and recoil. Character skill can also affect the UI, which means a skilled character gives advantages that the player can use, which just feels right. In the case of Morrowind, your character's STR should affect his damage output. His AGI should affect his swing speed and recovery after a swing. Maybe weapon skill affects both of those things. Certainly weapon skill should affect how obvious the enemy's telegraphing and how much your character telegraphs an attack, which is a UI effect that gives the player better information to apply his player skill on. Moving and aiming feel like they should still be player skill.