I answered my own question about why they choose Oblivion over Morrowind in my head last night. It would have taken way more work to bring into the modern age. Oblivion was already pretty close to what Skyrim is, and they even use the same scripting and logic (including bugs that were never officially fixed!) so all the work was just creating the new assets and then taping UE5's graphics engine to GameBryo/Creation.
It also would have required ass loads of money to record every line of dialogue. Remember: Morrowind didn't have a lot of voice acting. It was mostly text-only.