Bethesda's decision to release Daggerfall as a free download has made this page moot, but the information is still good if you want to get the boxed version of the game.
On a separate, but related topic, I came across an excellent article at TweakGuides.com doing a very in-depth examination of game piracy. I highly recommend that you take a few minutes to read through it.
Bethesda Softworks is no longer distributing Daggerfall and I haven't seen a copy in stores for about a year. That leaves only a few legal choices.
(1) see if one of your local software stores can special order it for you. While Bethesda is no longer distributing, there may still be a few copies in stock with your store's distributor(s). I wouldn't hold my breath on finding it this way, but it's an option.
(2) visit one of the online auction sites. Ebay usually has a few copies up for auction and some are actually in decent condition. The downside to this is that you aren't going to find out what kind of damage the disk has suffered until it shows up in your mailbox. Oh, yeah, and then there's the added expense of postage and handling.
(3) beg your best friend to let you have his/her copy.
Failing in those, that leaves only the illegal choice of finding a pirated copy somewhere and I neither condone nor support software piracy.
I have read a multitude of comments regarding something called "abandonware". The term seems to apply to software that is no longer being distributed or supported by the creator. As such, it is sometimes made available for download from third-party websites. The fact of the matter is that the law does not recognize any such thing as abandonware. A piece of software is either copyrighted or not. Period. Daggerfall is still copyrighted (and probably will be for the next 50 years or so).
This brings up the rather sticky subject of the "First Sale Doctrine." Under the United States' copyright laws, the holder of the copyright has the absolute right to determine how a copyrighted work reaches the consumer. Aside from prohibiting copying, they may not control what that consumer does with it subsequent to purchase (take that, Transcender!), but the right of first sale includes the right to not sell it.
Let's assume that I write a program that takes care of all of the tedious details of designing a network (that's what I do -- the design and installation are fun, but the paperwork details are a nightmare). That program is mine and I can either distribute it to the public (for a decent chunk of change -- I'm in business to make money, after all) or not. If I choose not to distribute it, that is a business decision on my part and what the consumer wants cannot override that decision. Yes, I would be depriving myself of income. But I considered that when I decided to not sell it. Maybe the program is hideously buggy and I don't want to mess with the technical support end of it. Maybe I didn't want to mess with the sales and marketing of the program. Maybe I just want a tool that gives me an edge on the competition (better/faster/cheaper is what networking is all about). Maybe I just want to play "dog in the manger" (go find a copy of Aesop's Fables). But whatever my motivations for distributing it or not, no one has the right to distribute my program without my permission.
The same logic applies to Bethesda Softworks and Daggerfall. There are any number of reasons why they would not want to continue distributing Daggerfall. The most likely reasons are that it is a tech-support nightmare (patch notwithstanding, it's still buggier than anything else I've seen and it does not play well with most operating systems and hardware produced since 1995) and Bethesda is working very hard to overcome the black eye that Daggerfall's poor quality gave them. Were I in their shoes, I'd probably go with the same decision (gaming is gaming, but business is business).
So respect Bethesda's right to decide whether or not to distribute their program and get yourself a legal copy.