I'd take Oblivion any day. Don't get me wrong, I loved Morrowind at the time and still think it's beautiful, but having gone back and played it after Oblivion, there's no contest.
Nothing compares to the first time you walked off the boat in Seyda Neen and took your first few tentative steps into the beautiful Bitter Coast swampland, or took a ride in a giant flea to Balmora with it's squat stucco buildings and carapace-clad guards.
But, it hates you. A lot. Morrowind is designed to frustrate and annoy.
It frequently garners praise for the diversity and number of it's factions and subquests. However, one must actually remember what these quests were and then compare them to Oblivion.
For example, let's take the oft-overlooked Thieves' Guild.
An example of an early quest in Morrowind was to steal a Dwemer Tube for Sugar-Lips Habasi. Where from? In a shack, surrounded by a gang of Commona Tong sympathisers. They stare at this particular box 24/7. This is done best, I found, by wandering about until you found the perfect spot where you could not be seen, behind a tiny pole, and then thwacking the box with lockpicks until it randomly opened. If you were unlucky and were seen, you could leave the scene and the thugs would stay on the inside of the door, seemingly dumbfounded that you seemed to disappear into thin air.
An example of a similar quest from Oblivion. If you would, cast your mind to the Elven Maiden quest. Simply, steal a bust from a guarded crypt. This sounds similar, until you realise there are two levels to this quest. Not only do you have to steal this item, but you have to pin the robbery on a snitch. You are not just randomly looting an otherwise uninteresting shack. There is a story, a purpose and there are a cast of characters who you can at least take seriously.
Another place Morrowind still garners misdirected praise is it's "varied" dungeons. They are, by and large, exactly the same style as Oblivion. Where Morrowind had Dunmer strongholds, Oblivion has ruined Imperial Forts. Where Morrowind had Dwemer ruins, Oblivion has Ayleid ruins. Where Morrowind had Daedric ruins, Oblivion has Oblivion. Where Morrowind had caves and tombs, Oblivion has...caves and tombs. Morrowind has got more varied outdoor areas than Oblivion, that's true. But, you must remember that most of the variation was between different colours of dust. Oblivion still has thick and intimidating swamps, beautiful grasslands and blasted heaths. It also adds snowy mountains. Therefore, I can only believe that when they say it has "less environments" this is to mean "less giant mushrooms", which seems a bit of a shallow reason to discount a game, especially with the release of Shivering Isles, which more than fulfills the giant-mushroom quota.
Oblivion is often lampooned for the halted speech of the NPCs, stating that it's a distraction and that Morrowind was better. In Morrowind, there were no Rochelle Bantiens telling you about their marriage to wild one Samuel. It was name, rank and number. Every citizen in Morrowind would offer you up an inane, standard description of their job; often proudly claiming themselves to be a "Pauper". That just reeks of copy-and-paste NPCs, whereas there are well over a gross of lines of dialog in Oblivion dedicated to the miscellaneous NPCs who will give throwaway comments that betray large parts of their character. Very few games have been this ambitious. Most games - even RPGs - wouldn't even name them, let alone give them unique dialog. Getting two dozen voice actors to read thousands of lines of dialog is no mean feat for a developer with limited previous commercial success.
Oblivion's true glory comes in it's immediacy and accessibility. It has none of the standard rolls of RPGs that dogged Morrowind's gameplay.
In Morrowind you may as well have been absent in combat. You could just sit there, gradually getting RSI and watching the swords slip through characters without harm, then watch an arrow fly harmlessly over your head to end up somehow impacting right in your face. The to-hit roll system was a flaw that made combat frustrating and broke immersion. In Oblivion, if a sword hits you, you get hurt. Fact. It keeps the action fluid and helps you to get involved.
In Morrowind, trying to follow directions to the next dungeon was like looking for a ninja in a haystack - even if you find what you're looking for you're still going to get stabbed.
Most of the time you were looking for tiny brown doors in vast brown wastelands. Then, when you get inside, you will probably end up in a high-level dungeon when you are a low level character.
Now, in Oblivion, it can seem odd that you have the cartographic skills of a satellite, and that when you get better all the rats are mysteriously replaced by trolls, but it always feels like achievable fun. The game isn't there to kill you, or frustrate you, but there to challenge and entertain.
Morrowind, therefore, feels like a much more accomplished art project and - at the time - was a revelation in 3D RPGs. It has given me, and seemingly many other gamers beautiful first memories. But in memory is where it should stay.
Oblivion is a more polished and game-like product, with equal - if not greater - effort put into the details.