Galaduir: DFSetup
doesn't work on WinXP, I tried it and I got an explanation from DFSetup community why it does not: it uses Inno Setup software to pack the installer, and Inno Setup doesn't work on WinXP.
GOG version is running fine, I just ask what
else I need to install to get a
purist bug-free experience. GOG version does include Savegame fix but I'm not sure about additional official quests. As for unofficial patches I'd want to hear some advice from Daggerfall veterans.
OK. Stick to the GOG version then.
My personal acquaintance with the TES series goes back to the time when Arena was released, and I've played Daggerfall from the beginning until today - but I don't consider myself a "power gamer".
This GOG forum contains a lot of Daggerfall-related information (probably more than you can or want to digest), and you can find the most comprehensive compilation of Daggerfall-related information on uesp.net.
My advice is to familiarise yourself with Daggerfall by playing the standard GOG version. It's not without its bugs, but there is no "bug-freer" version available (make sure to read the readme of the latest patch, in particular the workaround for the "void" bug - the only really serious bug in my eyes). There are additional quests available, or slightly different settings (like Werefall :-)) - you find details on uesp.net, but this can wait until later.
With that said, the GOG (same as DFSetup) version does contain many bugs, but most of them are not immediately visible - spells not working as documented, etc. If you're interested in infomation about such bugs, browse this forum for contributions of dtgreene - THE expert in this field, as far as I can tell.
I myself accept these things as structural aspects of an imperfect game world (happens in real life, too :-)) and live with them. For me it's more a question of being creative (to circumvent negative flaws), and of morals and ethics when they are positive, have the effect of exploits or cheats (take advantage or not?).