Just dropping small items on the floor -

http://i.imgur.com/bkG53pd.png

They tend to hover... is this just one of those things that cant be fixed?

I believe it's collision between the clutter and the ground.

Sure, you can fix it by open the console and click on each clutter and make sure you see its ID in the console then type tcl.

Tcl does nothing on objects, it will always toggle collision for the player (and all NPCs), no matter what is selected. Items don't have collision, anyway. But yes, items are not placed correctly on the ground as they are on other surfaces, including the floor inside buildings. But if you don't place them but just drop them to your feet, this does not seem to happen. If you drop multiple items like this, though, they will clip into each other. However, apparently you can place items on another item on the ground just fine, for example if you want to put something in a bowl.

Actually tcl does effect objects at least in-game, because if not then explain to me why I could correct a few rats that got stucked in the dungeon in UL 3.x.

TCL affects creatures, the player and NPC's but it wont snap objects to the ground.

Yes, I only mentioned the player and NPCs, but I didn't mean to include creatures when I wrote 'objects'. Anyway, unlike in the later games, in Morrowind, tcl cannot be targeted.