I posted something in the TES:Arena forum a couple of hours ago, about making the MIDI music in the game sound better: http://forums.uesp.net/viewtopic.php?f=1&t=38285
The same topic applies perfectly to Daggerfall as it is also a DOS game that uses MIDI for sound. So, please visit it and read if you want to learn more.
Discuss your favourite SoundFonts for Daggerfall in this topic!