Walking through the Ashlands near Ald Ruhn on a beautiful clear day, I was startled by a very loud and obvious sheep bleat that came out of nowhere. It broke my immersion pretty hard. There are no sheep in Morrowind, and I don't think anything else living in the region sounds like that. Besides, the audio file is a VERY obvious recording of a living sheep, not some distorted or human-made noise that might pass for a fantasy world sound. So, I took appropriate measures and replaced the culprit audio file with a re-named copy of another ambient creature sound from that region which was already in the game. I chose a somewhat quiet noise, since it will be occurring slightly more often in-game than it did before, and I didn't want it to be a loud, obvious sound that would be noticeably repetitive.

So yes, just replace the old sound file with the new one, and you get a sheep-free copy of Morrowind. Enjoy!