I stumbled upon this "character creation" tutorial that will help you make something that can level up quickly and kind of make combat bearable if you don't want too much of a challenge.
https://www.youtube.com/watch?v=lL6MqsTTauw To be clear this build guide doesn't use "broken" mechanics, but creates a char that levels up fast but still has some challenge. He is correct in that you find dwarven stuff rather quickly and Iron is mostly fine for some time. Also be sure to answer the questions on the char background, as if you have an opportunity to grab the ebony dagger it will be super helpful against enemies that are resistant to Iron until you can get some Dwarven stuff. So steer clear of lycanthropes until you get a dwarven weapon.
The spell list is pretty important aspect of this don't forget to buy them after you grind up enough money to do so. Having the Cure Poison, Cure Disease and Free Action is super important as enemies that paralyze you are probably the most challenging part of the game.
After you get a bit of a ways in you will probably find some "Unrestrainable" type magic items, at that point you can just tap "U" and use it when you get paralyzed. I have like 3 of them now in my inventory so I don't waste as many spell points o Free Action anymore. It's an expensive spell. I lucked out and found an "..of Magicka" magic wearable I could equip which basically absorbs magicka if you get hit by a spell, this helps GREATLY. The number one problem with having to use Free Action is the massive amount of magicka it burns, espeically early, which causes you to rest a lot.. which burns precious time on time based quests..
Though, combat in Daggerfall.. there's not really anything like a "difficult slider" to make it easy. It's going to be a challenge in the early part of the game no matter what you do. It will get a lot easier as you learn the game and get muscle memory up for the combat dance and get better equipment and level up your skills. Save often.. sometimes around every corner tap quick-save.. but also create 5-10 proper saves when you get main quests.. they are timed and if you screw up you can render the main quest unable to be completed and you are just a regular ole citizen running around the land at that point. I would imagine you can role play that as some other person is saving the world.. just not you.. :)