@Greg,
I had it Steam Overlay disabled already, but I found the problem. I keep all my game utility archives because I'm sort of obsessive. I didn't look at the path in MO for launching CS , and was loading it from the zip archive somehow...
No clue how this is even possible, but it works now that I've run it from the morrowind folder. Thanks for the help, I woudn't have looked twice at my MO if you hadn't mentioned that it runs for you!