Can I make a nation of werewolves?
No. Almost everything on that page is inaccurate. Generally werewolves are treated like NPCS instead of creatures and generally do not have captured souls (though some end up being treated like creatures and do have petty souls). Daedric armor has no effect on werewolves (besides the high armor rating), and daedric weapons do not get the bonus double damage that silver weapons (and the Mace of Aevar Stone-Singer) do. See the UESP for more accurate information of lycanthropy in Morrowind.