Just started the game after a decade of WOW. I was trying to play with a friend, but he was phased when we started (as expected) after starting the Morrowind tutorial after character creation. Once we got out of the area and went to the city we were still phased. Is there a certain point where the phasing stops? Or is this a bug of some type? I did log out and back in and it did not help. Sorry for the noob question, but couldn't find an answer anywhere else.
By staging you probably mean, that you are in different instances. This can be solved by porting to your friend.
Open your friends list and right click on the name of your friend. Select travel to player. This will be completely free as same as porting from washrine to wayshrine.
If you try to port to a wayshrine on your expeditions, this will cost a amount which is displayed on the screen and will increase if you try to do it multiple times. But the value will decrease over time kinda like a cooldown.
Normally this shouldn't happen if you are grouped. If it does you'll see a popup/or your friend will see it (depending on who is the group leader! -> The others will see it) telling you that the group leader is in another instance and if you'd like to port to him.
Click on yes and port there.