That Creeper seems very useful, almost too useful to be in the game. Also, a somewhat indecent question, did you mod the naked Nord's junk in; would stock Morrowind give him a loincloth?
In any case, I vote to help him regain his axe. Just think how sad Yook would be if he were separated from his axe. The clothes, less so. We should give Caius the information. Perhaps he'll have some more quests for us. Otherwise, we could try to join the Thieves' Guild - I suspect that after gaining the codebook would be easier.