Create a FAT partition.
Install DaggerFall using Dosbox. (Huge installation)
Copy the folder Arena2 from the DaggeFall cd-rom to your installation directory.

Edit Z.CFG so that it points to the correct patch for your CD-ROM

Download the latest patch for Daggerfall v. 2.13 patch
http://www.phyton.dk/gameutils/dag213.exe
Install it.

Download CompUsa Patch (More Quest and Items)
http://www.svatopluk.com/daggerfall/download/addquest.zip
Extract to Arena2 folder in your installation directory.

Download Moslo
http://www.hpaa.com/moslo/

Put Moslo.com in the DaggerFall installation directory.

Edit Z.CFG and change PathCd so that it is the same as Path.

Create a batchfile with these lines

Moslo.com /(%) FALL.EXE Z.CFG
% = Number of % of your CPU u want to use.
For Example my cpu is an XP3000+ at 2090mhz so that makes 5.0 in % about 104 mhz no more than that or else jumping is bugged.
My Config: Moslo.com /5.0 FALL.EXE Z.CFG

Run SETUP.EXE using VDMSound. Dont Use default. Create a new config.
Change EMS to 16384.
Disable Joystick.
Change Sound Blaster 16 to Sound Blaster Pro.
Check Close Dosbox on exit.

In Setup.exe
Set Sound to Soundblaster Pro
Set Music to MPU-401 (401 = Better Midi music)

Run the batchfile you created with VDMsound and play.

Hope this helps.