Broken Base: Daggerfall is a mixed bag. It's glitchy like you wouldn't believe, but the good parts are really good, especially for its time. Even now, the sheer variety of what you can do has not been topped by any other game in the series. It also has the second largest world in the series (and with far more variety than the rather pointlessly big Arena), pushing procedural generation far beyond almost any game since; on one hand, this resulted in a large number of unnecessarily large complicated dungeons, but on the other hand, it gave the setting a sense of scale noticeable even in a series famous for large worlds.
Demonic Spiders: Liches and Ancient Vampires. Unless you're resistant to their magical attacks, they can kill you instantly.
Fan Nickname: The sheer number of bugs in this game caused many players to refer to this game as "Buggerfall."
Game-Breaker: If you're Fire Resistant enough, you can just walk to a lich and let him blow himself up.
Once you become strong enough, you can just camp out in the woods and wait for poor enemies to jump onto your sword. Or you can just make a big HALT train and kill it. Either way, you will have much better loot than you are supposed to.
The Luck Stat is not as useless as it is in later games because a) it's not as hair-pullingly tedious to increase without enchantments, b) having that extra edge where everything is determined by a dice roll is incredibly useful, and c) having a high luck stat increases the chance that you find Daedric gear.
Good Bad Bugs: There are a large number, but principal among them is The Void, the black area beyond the wall mesh in houses and dungeons. Walking/jumping/climbing against certain wall types at certain angles would allow you to pass through them, which usually resulted in you getting stuck or falling to the bottom floor, requiring a reload. However, with practice and luck, it was possible to use the Void to cut through the labyrinthine layouts (not to mention avoiding enemies) to quickly reach your quest objective, a practice usually referred to as Void Running/Walking/Surfing. Occasionally the Void would also swallow up enemies, which while helpful against Vampire Ancients at level 2 could render extermination missions unwinnable.
Of course the patch gave us Alt+F11, which took you back one step. It pulled you out of the Void, and with it you could also retreat out of the dungeon if you had forgotten to set the teleport anchor.
Much like Oblivion and beyond, stores have closing times. Unlike Oblivion and beyond, however, you do not get kicked out at closing time. This lets you take things without being considered stealing.
A spell with the "Open" effect always opens a door, even if it has the minimum possible chance of unlocking (2%). And guards don't chase you if you break and enter during the night, so long as you don't try to force the door down.
Scrappy Mechanic: You cannot repair magical equipment in any way. Once their durability expires, you can never use them again. This includes Artifacts.
This mechanic was introduced by a patch in an attempt to 'balance' overpowered magical items, but proved unpopular enough that methods to repair the items were re-implemented in a later patch.
Werewolves may seem like the best thing ever (overpowered speed and stamina and attack) but if you spend too long in a dungeon, or even fast travel to a dungeon at a great enough distance, your stats will eventually plummet to zero making most monsters able to 1-hit KO you. Of course you could just fast travel to a nearby town, then return to the dungeon. Except that massively cuts into your time limit. The Ring of Hircine fixes this, however. There are essentially no drawbacks to lycanthropy if you have said ring.