That's an opinion. It's free, download it and try it out.

Classic Daggerfall defaults to Arena-like controls which are terrible by modern standards, but contrary to Arena they're not set in stone.
Classic is very playable if you take 5 minutes to switch to mouse look and WASD movements. I cringe every time I see a player struggle with defaults controls in a stream.

Daggerfall Unity defaults to mouse look and WASD movements, and GOG Cut modified more controls to match Skyrim defaults (from what I understand, as I never played Skyrim myself).
It also handles diagonal movements that classic can't; Higher framerate and better collision detection (can't get stuck on walls or fall into the Void randomly) also helps moving around

Some controls could probably be improved. Modes of interaction with F1 .. F4 is error prone (who never tried to pickpocket commoners by mistake?); But plain Daggerfall Unity goal is to match classic so changing that would require a mod, that doesn't exist yet AFAIK

- Classic DF controls are different from "modern standards", but to say that they are "terrible" is a personal opinion - even if it's shared by many. I myself prefer the classic DF controls (which is also a personal opinion).
- That classic Daggerfall can't handle diagonal movement is simply not true. For example, you can use the keys for forward / backward movement together with the keys for turning (or sliding) left / right to move in all directions, and it's not difficult or clumsy at all.
- DFU is NOT trying to fully match classic. The best example is the movement I mentioned above, which can't be done in DFU while still being able to use the cursor at the same time. As soon as you activate the cursor in DFU, you can't turn anymore. You may say you don't need it, because you can do everything with keystrokes, too, but it's not classic DF.
Classic DF supported two parallel operation modes (mouse-look and no mouse-look), and players could freely switch between the two. This is no longer fully possible in DFU.

Yes, I should have mentionned it's my opinion. Objectively, being the default also prevented many new players from really trying Daggerfall, and it's terrible in that sense.

I also tried diagonals; Forward and turning works, forward and sliding didn't, but maybe that depends on keyboard wiring or choice of keys, or maybe it's a DOSBox limitation.

Maybe DFU will try to emulate this a bit better, say be able to turn while in cursor mode, for the sake of completeness.

Nothing against opinions, and you don't always have to add that it's an opinion when its obvious (as in your case). I made a point of it mainly because I felt the qualification "terrible" (which I addept as personal opinion) is not appropriate and unfair, and it's not shared by everyone (though by the majority, I'm afraid) - view this in conjunction with the error to say that diagonal movement is not possible in classic DF.
It looks like you can't combine sliding with anything in classic DF (I thought I had managed it earlier, but when I tried it again right now it didn't work indeed). But forward/backward+turning does work.
Regarding the third point, someone else pointed out that it's a deliberate design decision of the DFU makers, and unlikely to change. I found a partial workaround, which is not as good as classic DF, but which I can live with (I do like to play DFU, by the way).