Daggerfall is an intimidating game. I've been playing it for years now. I've probably clocked in over 800 hours in this game. Let me give you new players some advice.

Before running the game, go to https://en.uesp.net/wiki/Daggerfall:Files and download DAG213.EXE and follow the instructions. This will patch the game to the final version of the OG Daggerfall. Because Bethesda, they released the unpatched game on Steam.

You'll have to run the patch through DOSBox since the program is in 16-bit format.
Shoutouts to Steam User fez for giving some instructions on how to do this: https://gtm.steamproxy.vip/app/1812390/discussions/0/3271312219426015785/
EDIT 6/7/2022: Bethesda actually updated the game to the last official version, which is surprising! This step is no longer necessary unless you want the CompUSA Patch (which is good to get)

Now that we've fixed at least some of the bugs, time to make a character.

Choose High Elf. Always.

High Elves are broken in Daggerfall for one reason: they're naturally immune to Paralysis. Every magic enemy in the game is going to paralyze you from long range past level 5. While paralyzed, you can't move, can't attack, can't rest to heal, and can only use magic or access your inventory. If you don't have a spell or a potion, you're dead.

If you don't want to pick a High Elf, you'll need a cheap free action spell. More on that later.

Now pick a class. Or more accurately, make your own. The default classes are terrible. The custom classes are more fun anyway, :)

A lot of the fun in this game honestly comes from making different characters and trying them out. My goto class setup is a Spellsword-like setup like this: Long Blade / Destruction / Alteration for Primary, Thaumaturgy / Illusion / Mysticism for Main, Restoration / Running / Jumping / Crit Strike / Mercantile / Stealth for Minor.

Choose 3X Spell Points and Athleticism for your Special Advantages.

Some notes:
- Language skills are pretty much useless. They only pacify certain enemies. Ettiquete and Streetwise are useful though, as they can both get NPCs to help you and get you out of court by debating the circumstances of your crime or lying, respectively. You'll also need high INT and high PER as well.

- Dodging is broken. Instead of increasing your chance to miss enemy attacks, it decreases it instead. If you're playing on DF Unity, they fixed it.

- If you're a High Elf, picking Critical Weakness to Paralysis will be negated by your racial bonus, basically allowing you to get more special advantages without any downsides. ;-) DF Unity nerfs this however, and makes it a 50% change to be negated, which is still better than nothing.

At this point, you should then name your class and answer the questions to generate your background. If you see an option to get an Ebony Dagger, CHOOSE THE EBONY DAGGER. It's up there with the Magnum from Halo 1 as the best weapon in the game you get from the very start. It can hit any enemy type in the game since it's made of Ebony. It also sells for a bit of gold too.

Once you've loaded into the first dungeon, change the controls into something that feels more modern.
My recommendations:
W - Forward
A - Slide Left
D - Slide Right
S - Backwards
Space - Jump
Ctrl - Crouch
Alt - Sneak (Sneaking and crouching are two different controls, be sure to hit both CTRL and ALT to go stealthy in this game)
LShift - Run
Mouse 3 - Activate Center Object
C - Cast Spell
X - Abort Spell
Q - Recast Spell
T - Rest
G - Transport
F - Switch Weapon
R - Ready Weapon
V - Check Status
I - Inventory
/ - Character Screen
B - World Map
Everything else should be ok
Also make sure to click on mouse at the bottom left and turn on mouse look.

Now for the first dungeon! Privateer's Hold!

SAVE THE GAME. SAVE THE GAME. SAVE. THE. GAME.

Run like hell. We're not ready for it yet. At least not as a first-time player who is going to get lost and die.

Follow the hallway after the first room with the rat and the treasure pile down past the bat, to the left, past the other bat, through the archer, into the giant staircase room with the super angry dangerous Skeleton Warrior who goes WRAAAAGH every 2 seconds. Quickly run up the staircase, jump on the platform with the chair, look to your left, and toggle the lever to ride up to the second level. Run right, past the rat, past the corner, and open the first door on the right. Open it, and hug the right wall until you see a texture with iron bars on it. Click on it.

Congrats, you're out! Save the game again.

At this point, you're free to do whatever you want. You should get a letter form Lady Brisenna after about 20 in game days telling you how to start the main quest. You can completely ignore her if you want - you can ignore the main quest in this game entirely.

At this point, I'd recommend going to Gothway Garden, joining the Fighters Guild or Mage's Guild, and getting some XP and money. But you're free to do what you want. Have fun!

I'll probably make some guides for some more complex and obtuse mechanics in the game, like optimal spell-making or how summoning daedra works or other factors, but https://en.uesp.net/wiki/Daggerfall:Daggerfall is your best friend for tips and advice. Feel free to post comments here too. I adore this game and I'm always glad to share it with others. Hopefully one day Daggerfall Unity gets a multiplayer mod.