Truth is what kills Morrowind is that there's no hard level cap. The game should cap out at level 15 or something, with no chance to keep increasing your skills. This would also make it impossible to join that many factions, instead of the ones your character is naturally good at.
That would probably the the worst thing you can do to tackle the problem.
Reminds me of Dragon's Dogma. I had unlocked all abilities, best gear and nothing more interesting to achieve character-wise when I wasn't even 50% done with the game. And I'm not even a completionist tackling all side-quests, etc.
So I just stopped playing, because what point is there to keep playing if your character won't get new abilities & strengths anymore - the rest of the game would just be repetition. The story really wasn't THAT interesting and the world mostly just vast without too many interesting things to see.
If character advancement stops, you have removed most of what makes RPGs interesting to begin with - especially for RPGs that are based on exploration and more sandbox-y (like all Elder Scrolls games).
Generally, the increase-by-doing approach in ES games is just one big exploitation fest. It will never be possible to fully contain powergaming within such a system.
There really is no reliable way.
Slow skill advancement down as some suggested here, and you will have most players complaining that advancement is way too slow.
Put in hard caps and you will have players complaining that there is nothing more to increase way before you "run out of game".
With an ES-like advancement system, you just have to live with the players breaking it in the end.
The classic level-up approach is just plain superior here, especially if not based on repeatable or grindable content. It is much easier to control when a level increase happens and how progression is paced.
Underrail would be a very good example here, especially with the oddity system (but even with normal combat XP it still kinda works, just not as well). You can do absolutely everything and still only squeeze a bit more XP and power out of it.
Or Vampyr, which ties its advancement to actual advancement of time in the world (you only level up when you sleep, which advances time, which affects the world, quests, etc.).