I don't care about graphics, but just wish it controlled better. I've almost died to the tutorial rat because of it and I regularly complete Doom and Doom II on ultra violence so I'm not a bad gamer either. I mean, controls are serviceable, but not that good.

Have you tried Mouse View mode? Esc->Controls->Mouse->check "View" near the top. You can also rebind keys.

In answer to your question: Yes, there are source ports, but I doubt any of them are sufficiently similar to the original to give the same experience or I'd be using one.

True, but then fighting is not very sophisticated either. That the first rat kills you is not unusual, but you'll get better soon.
I myself use the mouse (and fighting has never been preventing me from making progress in the game - monster resistances and material-related invulnerabilities are bigger problems in this respect), and, like darktjm said, you can rebind the keys to your liking.

Daggerfall Unity is an engine remake, but it's not finished yet. You can download what is available on their website if you want to go through just that portion of the game.

Here's a link to the roadmap of what is left to do if you're interested in trying it out, or wanting to wait it out.

https://www.dfworkshop.net/projects/daggerfall-unity/roadmap/

DF Unity looks nicer than DF, but it's more or less a frontend for DF - as far as fighting controls are concerned, there is no difference between DF Unity and DF.
PS: When you run DF Unity it establishes a an outbound connection with a unity3d.com address (unless your firewall blocks it). I'm not saying this is bad or good, but it's good to know ...

I mean, you can re-map the controls however you want in-game.
If you'd rather go with a ready-made modern control layout, I think the community-packaged version that's been hosted on Wiwiland for years has a WASD-based configuration (haven't tried the GOG version, but I imagine theirs uses the original key bindings?), in addition to including a bunch of extra (optional) community-made bug fixes, utilities and quest packs. I'd recommend that version over GOG's or Bethesda's downloads any day.

You can go to game menu and if you turn on fullscreen, then go to options, set the mouse view controls, and rebind the keys, like movements ones to WSAD, use to E, etc., you can get modern controls in this game easily.

Only thing which you can't change is holding right mouse button and swinging with it in order to attack with your weapon and then I think the F1-F4 keys for changing the interaction mode.

And also remember, that during combat each time you hit enemy you should moving back and forth to try to dodge his attacks. The best is to time this with your attack, depending on your attack speed.

And also, in the beginning you aren't supposed to kill all enemies. So if you find some enemy which you can't kill for some reason (like instakilling you or just not having right weapon type), you should run.

And also this is not about controls, but more about mechanic, but in this game, if you want (and you should have) level up your character, you won't get any experience. Instead, you have to raise your primary, major and minor skills, so choose your class well or create your own depending on which skills you want to use.

And last one, don't be afraid to use the main quest guide on uesp website, as there are (if you are using community fixes, if not, then it's broken)level limits for the quests.

That's the website of the company that makes the Unity Game Engine, which has been used in tons of games.

One of the options it provides is to get analytics data on how people play your game(s). Daggerfall Unity is open-source, though, so if you're worried about it doing something wrong, here:

https://github.com/Interkarma/daggerfall-unity

Well, I'm not worried that I'm doing something wrong - it's more the other way around, and this has nothing to do with open-source or not. There are people trying to collect MY DATA without my approval, even without telling me, and they are not telling me what data they collect and for what purpose. There are people who call this data theft, others call the software doing it spyware. I'm not a lawyer, but it looks very much like it's against European (EU) data protection legislation, and it's definitely nothing I'm going to support in any way.
If others have no problem with this, fine, but they should at least know that it's happening.

As far as I know the developers of DF Unity could prevent Unity from collecting user data (via a compiler option or a similar developer setting). Perhaps they want to do it?

*hands darkhog a BFG so he can kill the rat.*