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Just follow the first part of this guide and you will have a way better experience than with the Steam version.
https://www.pcgamer.com/daggerfall-mods-setup-guide/
Beyond that, let me tell you that Daggerfall modding community is not as crazy as others. You´re not gonna see big breast mods, or crazy new areas, or Macho Man as a dragon. It´s mostly just bug fixes, adding small features that were though out and were part of the marketing but never made it into the game, new quests in the same tone that add variety, graphical overhauls, making some systems more modern or small aditions that makes playtime more comfortable... that short of thing.
I had no graphics card and 4gb ram on my pc and Dream mod was too much but I could pull off Unity with the graphics turned down.
(I installed a cheap 2gb graphics card and got the ram up to 8gb and I run Dream at medium graphics)
For this game the mods are not merely add ons they are completing the antique game in some ways.
Just download unity and see how it runs, im 80% sure it will run fine, you can always turn down the settings, same goes for mods, if you notice performance drop while playing with new mods you can always disable them.
The mods are simple to install too, most of the time its just one file you need to drop into your mods folder.
yeah this is true sadly. DREAM is a beast and can downgrade performance, it´s not severe but noticable. I avoided Interior Lighting and Real Water Reflections becase those two plus DREAM apparently is really hardcore. WildernessNPCs can give you small loading times where the game freezes if suddenly a gigantic battle is about to spawn near you. And I pressume it´s because of Lively Cities but also when teleporting to a town, specially the big ones, there´s also some level of frame drops.
I also tend to have long play sessions or leave the game on pause and go walk the dog for an hour and then comeback, which only makes it worst. But a have a very average PC and I think those are mostly the mods causing some frame drops or loading times here and there, someone with a powerfull modern machine I personally think they could probably go crazy and be fine, at that point most of those frame drops will simply happen due to the nature of the engine and the coding, which has to make constant calculations.