There are many ways inventory management could be improved. If you are on the PC, this could be modded in.
As much as I liked having more articles of clothing in Morrowind, it was a bit of pain to change clothes. I used to change to street clothes in towns, then traveling armor, then battle armor depending on where I was going. I got over that after a while and just wore armor. I am sure my character was quite stinky after a while.
It would be cool to at least have a clothing and armor set that could be identified so it could be switched out as a group.