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A while back, Bethesda allowed free downloads of Daggerfall from the official website for The Elder Scrolls. However, the old website has been removed for Skyrim promotion and the page for Daggerfall is no longer there.
Do they still offer Daggerfall for free anywhere?
Update: Bethesda has updated The Elder Scrolls website so you can now download Arena and Daggerfall from there.
This wiki page on the Unofficial Elder Scrolls Pages should have the links you need:http://www.uesp.net/wiki/Daggerfall:Files. I haven't tried them myself.
