Personally I like the idea. I usually also seek some inspiration from other games/stories when I make my characters. But instead of giving them the exact same biographys I try to "convert" them, so to say, so that they fit into the world of Morrowind. Like your Medieval Jedi. I would give his class a suitable name but make the description resemble that of a Jedi.
And what's this talk about law suits? Why on earth would some game company sue you for making a character that is taken from their game?
The only reason to sue somebody for stealing/using their idea is if the person makes a mod containing their ideas and characters and starts to spread it out to the public without consulting them first.
That might lead to law suits, not making characters for your own use
