You can also just download this. http://theelderscrolls.wiwiland.net/?title=Daggerfall_:_DaggerfallSetup_EN

It autmatically configures DOS or whatever to make it run on current systems. I downloaded that around a year ago and it works perfectly on Windows Vista, no setup from me required. I still have it now, I just don't play it much. BTW there are psychic guards in Daggerfall.