I've always wondered, Bethesda planned on adding the city to Oblivion. They were in fact almost done when it was removed for vauge reasons if I recall. So has this city effectively been deleted from canon because it was not implamented? For those not familuar with this I am refering to this.

http://www.uesp.net/wiki/File:OB-Sutch_Kvatch_Skingrad.JPG

Then of course theres also this map with Sutch on it.

http://images.uesp.net/f/f9/Tam-Maps-West_Tamriel.jpg

So clearly they were pretty commited to the idea of this place exsisting.