To me, there's two lists, one for the most powerful, and another of the ones I personally like. I'm going with the latter, because of the context of the OP. In Descending Order:
10) Orcs: Ugly, and just too powerful. All you really need to add is Archery to make them completely unstoppable.
9) Bosmer: Common Resistance, and the most useless Racial Ability. Also, shrimps, so they don't run that fast even unencumbered.
8) Argonians: I have 1 Argo Character. Mostly because of their starting skills, they have no Offensive capability, so it takes a long time for them to be effective. Their OP Racial more than makes up for this, but you can't use it every fight until you can start actually dealing damage.
7) Imperials: May be Bias, they have a nice skillset, and their daily can be a life-saver, but I always associate them with the Empire, which wanted to chop off my head, and started off every game with me in bondage.
6) Kajit: The only infinitely re-usable power, offset by being able to turn up the Brightness, and Contrast on my display. I don't like the tail, it bothers me, and clips through capes.
5) Nord: Cold Resistance, and Fear. Getting out of the ones I don't like, and into the ones I like less, because there's better choices. With the caveat that my favorite character this whole game just happens to be a Nord.
4) Dunmer: Make great Nightblades, Spellswords, and Destruction Mages, that's about it. Ancestor's Wrath is useful early in the game, before I make it up to the Scorched Cape for Flame Cloak. Fire Resistance isn't rare, and I mostly just use it for not having to avoid my own Blast Damage. Also helps if you become a Vampire, which I never do. (They suck, and have been done to death.)
3) Redguard: In my top 3, because they have my favorite power, and a good starting skillset. Lack Armor, though, and Poison Resistance is almost inconsequential.
2) Breton: My favorite from Morrowind, and still a close second, but I've abused Dragonskin to the point that it's no longer fun. Still the fastest track to the Magic Resistance cap, but lack any weapon/armor skills. I make up for the last point with Bound Weapons which do enough on their own to compensate for a lack of skill.
1) Altmer: The fastest running speed, and the only stat boost in the game. Also got a head start on Pure Mage, but their mobility also makes them extremely effective Archers. The Daily Power is less OP because you have to stop casting to catch up, which I actually like better. In short (Ironically enough) they're not overpowered, but all your bonuses make it a lot easier to build anything. Even Heavy Tanked, they won't be as slow as a Breton in the same kit, but Unencumbered, you spend a lot less time running from objective to objective. Also, they can pull a Hitman Ploy in the Embassy.
