So, my fiend bought me Morrowind over Steam a while back for my birthday. I never really played it that much, and when I did I found it hard to get in to. My questions to everyone who reads this are does it hold up and should I play through it, i.e. does it get better than the earlier parts of the game? 

I was instantly hooked the first time I played.  Aside from melee combat getting less frustrating, what you see in the beginning is pretty much what your gonna get for the whole game.  I still go back and play it from time to time so I would say it holds up, though it might be different if you didn't play it when came out.  You should try to play through it for a couple hours to get a good taste.

Alright, thanks for the info!

It takes a bit to get into, with the combat as it is, but once your skills start improving, it'll be less of a grind.

I would say it gets a lot better after the first few hours.  The combat gets magnitudes more fun and exciting once u start being able to actually hit things, which also allows you to be more tactical as well.  Having a good imagination and roleplaying really helps at this sort of game.  If your a melee character a great way to get stronger is just to find trainers for the abilities you want and level them up 20 or so levels.  The training might sound expensive, but there are a few places to make money early on either by stealing or raiding some easy dungeons and then selling to the Creeper in Caldera(who will give you 1:1 cash value for the item).  There are tonnes of faq's and guides that can help with that.
 
And if you are into power gaming then do this:
 You need 10 levels of any of your Major or Minor attributes to level up.  Each time you level a skill related to a certain attribute, that attribute receives a multiplier.   You get three attribute points each time you level, which is then multiplyed by the multiplier on said attribute.  So when you see Strength X3, you will get 3 strength per one point after you level up.
 
The best way to maximize this is to spend a bunch of money training the non-major/minor attributes that wont level you up so when you do reach a new level you have a multiplayer of x5 instead of 1 or 2.
 
The reason you'd want to train the skills that wont level you up is because they will generally start off at levels 5-10 which means they will be much cheaper to train, and wont force you to level up prematurely and waste the attribute points without the benifit of multiplyers. 
 
This also allows you to manage which attributes will receive the multipliers upon level-up.  Since you only get three points per level, it is a waste to train anymore then 3 attributes each level.
 
I apologize if that information isnt clear, i've tried to explain it as best as I could, let me know if you have any questions or need clarification.  It really does make the game more enjoyable, but does take some of the excitement out of it.

Morrowind has probably the highest level of entry of any game with comparable clout. You're going to be wondering right off what all the hubbub is about.  
 
Don't quit playing.  
 
Once you get rolling in that game, it's incredible. But you have to slog through the first few hours--which are pretty much unbearable. 

Thanks for all the advice guys! I'll have to boot it back up again.

Get some mods there great.

 The recent announcement of Skyrim has me excited for TES, having only played Oblivion (put 170+ hours in) and remembering how when Oblivion came out, the hardcore fans clamoring about how Morrowind was better and bla bla bla. Anyways, to the point, I just won an Ebay auction for the Xbox version of The Elder Scrolls III: Morrowind, paid $1.04 for the game (unfortunately disc only), paid more in shipping. 
 
Are the manual and map a necessity? Also, I almost paid $20+ to get the game of the year edition, is the additional content really good?