Here's a tutorial on creating books in Morrowind that should help. Another way to do this is through player-created mods. If you have more than 256 MB RAM, consider adding on Morrowind Enhanced and Journal Enhanced. (The former is required to run the latter.) JE lets you place a quill pen, and blank book or scrap of paper (purchaseable at various shops) into your inventory. When you drag the pen over the book/scrap, you're offered the opportunity to start writing. You can also erase or add to anything you've written before. To read the book/scrap, you just treat it like any other book. Works great. You can find ME and JE
here.