These should help you out:
http://en.uesp.net/wiki/Daggerfall:User_Interface#Mouse_Controls
http://en.uesp.net/wiki/Daggerfall:Key_Controls#Recommended_Non-Default_Key_Controls

In the future, though, you should try looking/asking in the game- or series-specific subforum (in this case, the Elder Scrolls series forum) before creating a topic in General Discussion. ;)

There's a button to toggle mouse look. The right mouse button still swings the weapon, and left click activates the item in the center of the view window.

Easy, you just go to the "mouse" sub-section in the "controls" menu and change the mouse controls from "cursor based" to the "view based" scheme. You can also switch between the two on the fly during gameplay via the "activate cursor" key, which, I believe is set to the enter key by default.