Well, that depends on numerous things. If you have a good enchant skill then heavy armor is the way to go, as the primary disadvantage (weight) is effectively elimanated, and daedric has the best armor rating, enchant capacity and looks amazing. However, if you can't get constant effect fortify strength 50 points on self then heavy armor will severely reduce your carrying capacity. Light armor has (comparitevly) little protection but you don't lose 350 pounts of carry space to it. If can get the best medium armor set (adamantium helm, royal guard pauldrons and gauntlets, lord's mail cuirass, everything else ice armor) then it provides a good protection with relatively low weight weight. However, when you get to the late-game, you can't bet a suit of enchanted daedric with enchated clothing underneath, as you can carry several times more than what you could with a suit of enchanted glass. As for weapons, again it depends on skills. If you have a high enchant skill, ebony staffs make for powerful enchanted weapons. Alternatively, you could use ebony scimatars, excellent weapons with high enchant capacity. But if you aren't a good enchanter then it comes down to your own skill and playing prefrences. So if you want the best, level your enchant, heavy armor and longblade. Go to UESPWiki for details on finding these things. Oh, and hire a few mercenaries and dogs to carry loot.
Daedric armor.
Yes, you can become a werewolf in "Morrowind: game of the year edition", as it comes with the "Bloodmoon" expansion.
In original, non-edited Morrowind, the best Light Amour is Glass, the best Medium Amour is Ordinator and the best Heavy Amour is Daedric. in game of the year best light is glass or Dark brotherhood, best medium is adamantium or royal guard, and best heavy is deadric or high ordinator, especially the Her armor, which is high ordinator that increases all of your stats.
Yes if you have the Game of the Year edition or the Bloodmoon expansion
The Game of the Year Edition of Morrowind for the Xbox has a golden colored cover. The Platinum Hits Version has a (wait for it) Platinum colored cover and the original has a brown colored cover.
The GOTY edition is available on Steam.
Castle Karstaag is found in the north of Solstheim. You'll need the Bloodmoon expansion or the Game of the Year Edition of Morrowind to have access to Solstheim.
horse armor
Werewolves can be found in Solestheim (The Island that comes with the GOTY((Game Of the Year Edition)) or the Bloodmoon expansion)
This are the best armors in the game : Cailan's armor (return to ostagar dlc) blood dragon armor (collector edition) grey warden armor (warden's keep) Dragon scale armor
Ishak Pasha is a real armor, Turkish armor is just a costume and only in the special edition of the game, they look a little bit different.
dragon armor from ashmarsh
No Morrowind is a one player game, but I've heard of a failed beta of an online Morrowind for the PC.