However, all weapons and armour artifacts are apparently affected by changing materials which palswaps any pixels in the 112-127 index range to whatever material seems appropriate to player's current level. This seems to go even beyond vanilla Daggerfall, although I've only been able to test this with one vanilla saved game and one low-level character whom I gave all artifacts via the DFU console:
Spoiler!
The vanilla character even had palswaps on artifacts which looked quite okay in vanilla game, including The Mehrunes' Razor and the Wabbajack. I'm attaching the saved game so you can check this. Note that vanilla DF palswaps all artifacts, while DFU does this only to those which are visible on the paperdoll.
This issue can be fixed by editing the sprites, but I suppose it would be more beneficial to alter the code and remove this palswapping altogether.