I really hope Skyrim takes place after both The Infernal City and the next novel, because I really like how much the world changed in the 40 years after Oblivion.
I was under the impression that the city is due to Umbra not Vile, and technically the city is in oblivion. It exist outside of Mundus plane of reality.
I love the Dummers (second only to imperials). It broke my heart to read all the crap they had to endure, but I take solace in the fact they weren't on Morrowind when the IC came.
To add, we don't know how many Argonians were lost, for all we know every single empire influenced Argonian is dead, leaving Morrowind to be reclaimed by Dummers, or the empire in the name of the Dummers.
Even if every single empire influenced Argonian is dead, the Dunmer are in no position to reclaim their land just yet. Remember that they had already invaded mainland Morrowind and slaughtered the remaining Dunmer there before the events of The Infernal City. The Dunmer who fled to Solstheim have quite a while of work ahead of them before they're a big enough power to reclaim their land.
Plus, I like the idea of the Dunmer not getting their land back. I don't want the lore to change so drastically just for it to go back to the way it used to be at some point. And it's not like the Dunmer could invade Black Marsh at any point in the future, Black Marsh is much more dangerous than mainland Morrowind and much more difficult to conquer.
And I'm not sure the Dunmer who lived on Vvardenfell would have preferred the entirety of Vvardenfell being covered in lava and ash to only some of them being turned into zombies by Umbriel.