Whether Morrowind "holds up" or not is very subjective. All i can do is tell you my own story and explain why I like it so much.
I started playing Morrowind shortly after it came out. I remember all the video game magazines were raving about how great it was so i thought i give it a try.
Prior to Morrowind i never really played RPGs at all. Sure there was the inevitable FF7 and i did play Diablo (if we can call it an RPG) but a proper western RPG, never.
Soon enough i found my self on that ship heading for Vvanderfell and was immediately surprised by just how much options you have when customizing your character. It probably took me an hour just to decide what race i wanted to play, let alone what class, sign and everything.
Once i got out the census office i remember being amazed by just how many NPC were around (which by my today's standards isn't really all that much) and especially by the fact that you could talk to any of them, and each one had many different things to talk about.
First i thought that all those things they had to say were very important and relevant to the main quest so i read and read and read some more. Sure enough i got bored by it soon and tried to actually focus on the quest.
All i knew was that i had to go to some place called Balmora and speak with some dude. I bring up my map and ofc there was nothing there. So i start talking to villagers once again and i think one of them pointed out that the best way to get to Balmora is to use the Silt strider and that there is one just outside the village.
Since i somehow managed not to notice the giant bug, i wondered WTF was a Silt and where was it.
I left the village, crossing that little bridge trying to find the Silt (which is funny cause it's right there), naturally walked right passed it and instead stumbled upon a door, leading to a cave.
Thinking that this cave is somehow related to the main quest and this mythical Silt i entered and was immediately greeted by a slaver trying to kill me.
"Finally some action" i thought, i readied up my sword and began the epic fight.....
So after i died, i realized i haven't saved once since the beginning of the game and i had to do it all over again.
This time i decided to make a mage-like char. I go through the whole initial thing, through the census office, spoke with some villagers and off to the epic cave!!
This time i was ready! I bought some armor, some potions, and had my mighty fireball ready.
After missing or failing to cast most of my spells i finally managed to kill that first slaver.
I loot her and found nothing but a dagger and some crappy sloths, and than i realize i was almost dead, had no mana left, no potions and nothing to recover (at the time i didn't know you could sleep).
So i thought screw this game. It way to hard and confusing for me. I un-installed it and just forgot about it for the next few months.
Than, i don't know why, i felt the urge to try it again, but this time properly. I read some guides on how the game actually worked, figured out the confusing leveling system, realized that not everything is related to the main quest (in fact very little is), learned a little about the clumsy combat system, and on just how much freedom you have.
Made a new char, went through the whole initial village entered the cave of DOOM and sure enough after a little bit of struggle i cleared it, whole 3 slavers of it.
I felt good, i felt like i actually managed to accomplish something, even thou this cave is completely irrelevant.
So after making the quick trip back to the trader and selling most of junk i found, i went to the Silt strider and made my way to Balmora.
I was amazed right away by the sheer size of the place. All those houses, traders, different NPCs i could talk to....
After finally managing to find the guy i was looking for, and he telling me some mumbo jumbo about some "Nerevarin" business, he tells me that before i start my epic jurney i should go and join a guild and do some freelance work.
So i did. I joined the fighters guild, and was given a quest, to kill some rats in a basement, which i did pretty easily.
Than i was given the following quest, and this one was just a little bit more complicated.
I was to exit the town, follow a very clear set of directions enter some Dwemer ruin (ofc i had no idea what Dwermer were) and get some item.
So i left, exited the town from the south and checked the directions once again. They seemed clear enough and i surely wouldn't have any problem finding this place.
So after 3 hours of wondering around i finally manage to find this god damn place and entered expecting some relatively straight forward dungeon and the loot at the end.
So after 6 hours of wondering around that god damn ruin i finally managed to find this artifact that ,to my surprise, looked just as slightly different random crap in a sea of all the other random crap that was laying around.
But i did it, i had the artifact, and it felt epic. I felt as if i accomplished a major task and thought that i finished a major portion of the game.....only to realize later that was just a mere side-quest, completely skipable and unrelated to the main quest.
And than something clicked. Something just felt right about this game. I finally started to realize just how big this game actually is. So i played through,, learning more and more about what was actually going on, reading all the different books i found on the way, learning more and more about the complicated lore of this world.
I found out who the Dwemer were, all the different gods and different cults in Tamriel, the difference between Aedra and Daedra, the complicated and yet fascinating Dunmer people, the 3 false gods and the 4 houses of trouble......
The more i learned the more i wanted to know, and little by little i fell in love with this game.
I realize this a major reason why i love this game so much is cause it was the first one for my of this kind, and i probably would have the patients to play such a game today, but still i think Morrowind is one of the best games ever made, and while i find Skyrim to be really good, Oblivion is just pure undiluted shit compared to it.
That said, i think Morrowind doesn't hold up......gamers today are too lazy.