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For now I just partly fixed the issue with a rule; I don't loot & sell any of the equipped unenchanted gear of enemies.
There are some good chests, but as already said the best ones are after you kill a boss. You'll know something good is near as the music changes into a gentle, but high tempo little tune signifying success and juicy rewards.
The proper overhaul in my opinion is something along with Morrowloot in Skyrim SE. It's instead hand placed loot with appropriate challenge. It can never get perfect balanced in this kind of game if there is some sort of randomized and level scaled loot.
Enemies seem to have less stuff but still strong potions and sometimes enchanted weapons. But no more expensive armor. Loot still being thrown at me, but from containers this time. I will remove the optional
Descension - Increased Equipment Loot.esp
Right now it's a little better. I'm still being persecuted by involuntary wealth because early game conditioned me to be a shrewd scavenger and encumbrance manager
Ascension has a "Lite" optional version you can use to just get the loot and creature spawning fixes without all the other gameplay changes. This will fix the problem of Bandits everywhere showing up in Daedric armor or whatever as well as put the more valuable stuff only in "boss" treasure chests, rather than being carried around by every enemy you run into in the open world.
A rat solution: drain health 100 for 1 second, 30 around target would be useful.
Don't think the ones developing Morrowind would expect that most would go online and find guides on where to get the best loot.
Now the DLC increased the difficulty a lot and all now had reflect spell.
But if they did not cast spells, weakness to magic and absorb health worked well.
Large area level 1 levitate was an non hostile crowd control spell.
I once used it to equip an ring of levitation had had an group of hogs follow me off an cliff.
We have flying pigs until the spell timed out.