If, immediately after starting the game or loading a save in the starting dungeon, you press ALT+F11 (I think that's what it was), you can teleport to the exit. Exit the dungeon and fast travel to a town, and now you can join the Wizard's guild and make your own spells, making the game a lot easier. There are other options as well, as the game is not linear after you leave the starting dungeon.

Also, if you create a good Custom class, the game gets a lot easier. (When looking at the change in leveling speed, note that the enemies do scale to your level, so XP penalties aren't as bad as they sound.)

What, Daggerfall has this dumb enemy level scaling? Well, then goodbye Daggerfall! Thanks for the info, dtgreene.
I`m playing Daggerfall since a few hours and found out that it`s really impossible to survive even the beginning, so I`ll remove this game from my hd now.

The beginning dungeon can be rather difficult. However, during character creation one of the questions you answer nets you an ebony dagger. This makes things much easier. I always take ebony dagger on characters no matter how I intend to play them.

Daggerfall has a steep learning curve, but it's a lot of fun once you get the hang of it. I learned by reading the FAQs and such at UESP's Daggerfall page (can't post links for some reason).
Seriously, give it a shot, and soon enough you'll be killing everything in the first dungeon with a freshly made character.

Daggerfall's level scaling is very different from that in, say, Oblivion. It is true that there is some dependency between the player's level and that of the monsters when you enter a dungeon. But when you leave a dungeon and return later, you will still find the same monsters. Moreover, the main story-dungeons are hand-designed and different beasts altogether.
In Oblivion, monsters have scaled when you return to a place at a higher level.

Try Arena, if you are looking for random monster levels (or the random monster level mod for Oblivion)!

Please don't give up playing Daggerfall just because you find fighting too hard in the beginning - it takes some getting used to, I know, but after a while, you'll be able to survive the fights.
- Try practising! For example, save the game before you get to the first mouse in the starter dungeon - not a very tough opponent. Practise killing it as often as you like, until you feel comfortable with the fighting controls (mouse swing etc).
- Not every opponent can be killed with every weapon. The first imp will kill you before you can hit it, unless you can cast spells or use a special weapon (depending on your race and class selection). If you can't hit the imp, avoid it. You may be able to return later, once you've found the right equipment.
- Use fighting tactics. Your third or fourth opponent is a thief (down in a cellar room), who may kill you quickly, if you simply run into him and try to hit him. Use "hit-and-run" instead. Attack him, and then move away from him, then attack again.
- Move left and right when dealing with ranged attacks.

You may have to repeat these early fights a few times, but you'll learn from your mistakes. Remember saving before it gets dangerous, and re-loading when you want to try again.

Good luck and have fun!

The beginner dungeon is quite difficult. Daggerfall definitely required you to carefully create your character to survive the start. Have a look at some character builds, once you finish the dungeon, the game opens up completely and you can create the character you want.

This was the first Elder Scrolls game I played and still love it to this day.