As someone who is somewhat familiar with copyright law, the reason Bethesda doesn't want people merging assets is probably because they signed a license that they'd only use the assets in a certain game when they got their textures (assuming they didn't get them as a WMFH made by an employee; the reasons why this wouldn't be the case are beside me).
Skywind doesn't really need new assets all that much because Dragonborn (if the player has it) does a decent enough job of providing several basic Morrowind-esque architectural features and textures to the game, though I'm not entirely sold on recreating a whole continent with just the stuff for Solstheim.
As far as engine rebuilds go, OpenMW and DaggerXL (http://xlengine.com/
) provide a second breath for Bethesda games (though Daggerfall runs well enough-for Daggerfall-in DOSBox).
From a legal perspective, these engine reconstructions are actually very different than moving between games. Copyright really protects the spirit or essence of the work, the human experience of it, and as such the actual functionality doesn't change. From a copyright law perspective, OpenMW is
Morrowind in so much as it offers the same experience. Since its main goal is compatibility and some minor improvements (plus some optional improvements down the road), there's no copyright issue with it (just as there's no copyright issue with, say, hardware emulation). It would be very, very, very difficult or nigh impossible from a legal perspective for Bethesda to shut down OpenMW. They could make things very hard for the project, but it would be petty and vindictive and incur legal fees that they probably don't care to face, especially considering that OpenMW might actually garner more Morrowind sales (heck, after it's finished they could even bundle OpenMW into the standard Morrowind distribution on Steam and call it cross-platform compatible, given that OpenMW's code is GPL'ed). Mind you, the case that I'd use to argue this to the Bethesda legal team is that Sony case with the VCR's, which does not establish a precedent to protect the sort of things that OpenMW resembles (actually, you could make a clever defense around it, but there are better things, such as pointing out that clauses in the DMCA explicitly allow certain "illegal" things for "archival" and "compatibility" purposes, which indicates that the fundamental role of copyright law is to protect the sale of works, rather than prevent other people from accessing it).
Lengthy late-night ranting aside, one important point to address: What you do in the privacy of your home is your business, except in copyright law. In copyright law they will hunt you down and slap you with a lawsuit regarding many thousands of dollars. OpenMW just happens to be in very comfortable, relatively well-charted, legal territory (as is, say, ReactOS).