I think the appeal of medium armor in Morrowind has less to do with it being optimal, and more to do with aesthetics. I felt like heavy armor was more the province of Imperial shock troops, whereas Orcs, Dunmer and Khajiit (the latter two I preferred to play) were more inclined to medium armors when they did march to war (there was even a lore book about Khajiiti preferring the maneuverability of medium armor).
Outside of lore factors, I think efficiency and raw armor (medium being worse than heavy or light when the best armor in the game is compared) matter very little in a game where an experienced played can drop into Caldera five minutes into the game, get a free set of orc armor and sell all the Seyda Neen loot to the Scamp, before picking up a dwemer jink sword and becoming effectively unstoppable until level 20 or so (assuming you adjust the difficulty slider as you level, as you should). Morrowind was the sort of game where I felt comfortable wearing nothing but regular (albeit high quality) clothing, enchanted with various useful escape/maneuverability tricks, and still getting through all the quests. Armor was strictly a choice, and that was how I liked it.
Skyrim made it so I can't play a khajiiti monk who refuses all armor, or a Dunmer assassin, who dressed like his noble station permits, so yeah, I miss the customizability too. Maybe if the mmo flops, the next project will return to the olden ways or frivolous detail.