Did it ever say he couldn't morph? I thought that was just a plot hole.

Ahh, true. The Andalites really didn't go around acquiring battle morphs, did they? That always seems odd. It seems like the Andalites would go for every weapon they could possibly use. I guess it just didn't occur to them? . . . but then why would it occur to Visser Three, who is not that bright by the time the series proper starts?