Here is the problem/solution explained directly from bethesda´s own homesite:
Most problems encountered in Morrowind are caused by fragmentation of the Xbox´s finite amount of memory. Morrowind is a huge game and needs as much of the Xbox´s RAM as possible. Certain games may fragment system ram or your hard disk. Below is the best way to solve the problem in Morrowind:
- Find a place to rest. If in a town, walk just outside of the town.
- Rest for three days straight.
- Once you have rested for three days, make a new saved game. Don´t save over a previous game, make a new saved game.
- Once the game is saved, immediately load the game that was just saved.
This will help to clean up any items that have been left laying around, as well as reset any objects that have been moved in the game. The combination of these two items will help reduce the amount of memory needed to load up an area, as well as minimize the size of the save game files. This, in combination with the steps below, will help to prevent most problems from occurring.
Try and save on a new save game file every few hours of play. Most people find that saving their progress to a new saved game once they are done playing for the day helps to prevent problems from appearing.
Don´t leave corpses laying around. If you kill something, dispose of the corpse. If the body has items you don´t want, put them into a container. Items left in a container will disappear faster than if they are lying on the ground.
Don´t move items that don´t need to be moved. While it may be a neat trick to play on an NPC, rearranging their house actually takes up more of the Xbox´s memory and increases the size of the save game file.
If you notice your inventory becoming rather full, take a moment to go through it. If there are any items that you find you don´t need, either sell them or put them into a container.
