Is Morrowind better with mods?

The game feels immersive when you add the Morrowind Code Patch. Undoubtedly, adding mods improves the experience when compared to the vanilla version.

Should I mod Morrowind for first playthrough?

Play without any mods, to start with. For a beginner, there is not even a point in using the official mods, not to mention the graphical enhancements or the unofficial patch (you could install that patch, if you know how to do it, but you'll be fine without until you are very familiar with the game).